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the future of money

Last year, 875 million payments were made via cheque in Canada, according to the Canadian Payments Association.Getty Images/iStockphoto

How Canadians interact with money - both physical and digital - is changing as financial technology evolves.

The options available to Canadians to make payments have never been more plentiful: from cash, credit cards, Interac and e-mail transfers, to a growing number of mobile payment apps.

And yet last year, 875 million payments in this country were made via cheque, for an average of about 25 a person, according to Gerry Gaetz, below, the president and chief executive officer of the Canadian Payments Association, the organization responsible for this country's national clearing and settlement systems.

Gerry Gaetz, the president and chief executive officer of the Canadian Payments Association, the organization responsible for this country's national clearing and settlement systems. Canadian Payments Association Canadian Payments Association

(Canadian Payments Association)

While Canadians on average use fewer cheques than Americans (68 cheques a person) and France (46), according to John Chant, an emeritus professor of economics at Simon Fraser University in British Columbia, it leaves it firmly in the rear-view mirror of many European countries. Germany, Sweden and Norway use almost no written cheques, while Finland abandoned the personal cheque in 1993 and Poland followed suit in 2006. These countries now rely instead on payment systems that are totally electronic.

It's a move that makes sense from a business standpoint, with cheque use in Canada declining at a rate of about 7 per cent a year, according to experts. Research from MasterCard Inc. and Kaiser Associates Inc. from 2013 indicates that migrating to electronic payment options could save Canadian businesses about 41 per cent in business-to-business transactions.

"My rough estimate suggest that businesses could save between $1.6-billion to $4.4-billion a year if the costs of using cheques were halved by moving to a fully electronic payment system," says Dr. Chant, who authored a report for the C.D. Howe Institute on the subject.

He believes that our society will eventually join Finland, Poland and others in eliminating cheques completely, though he cautions that it will be a "slow and painful process."

It is the absence of an electronic alternative that is the biggest obstacle to the total elimination of the cheque, he says, with current conditions giving financial institutions little incentive to invest in an electronic payment system. Some other countries charge consumers for cheque use, leading to a sharp drop in usage.

Another obstacle is habit. "If you write your rent cheques once a year and you've always done it, you continue to do it," says Mr. Gaetz, adding that for small businesses, writing cheques also doubles as a convenient and rudimentary way to do record keeping via the cheque stubs.

While he says that the conversation surrounding the elimination of cheques reminds him of those that were had leading up to the elimination of the penny in this country, Mr. Gaetz is adamant that the time has come to move forward.

"Cheques are really one of the least efficient parts of our payment system," he says, adding that it is roughly $4 less expensive per transaction to use digital means.

"If you add it all up there are some pretty significant efficiencies that could be generated if you moved all of the cheques to digital payment methods."

However, there are reasons people and organizations continue to use cheques.

"Canadian businesses still love the cheque," says Sue Hutchison, below, group head, treasury, global payment solutions for D+H Financial Technologies in Toronto, producer of many of the cheques used by Canadians.

Sue Hutchison, group head, treasury, global payment solutions for D+H Financial Technologies in Toronto, producer of many of the cheques used by Canadians. D+H Financial Technologies TYNAN STUDIO D+H Financial Technologies

(Tynan Studio/D+H Financial Technologies)

"Canadian businesses don't really have a great alternative to cheques today, so our view is that the cheque will endure probably for at least another decade and may never go away."

In defence of the cheque, Ms. Hutchison reasons that unlike other payment forms, such as credit cards or e-mail money transfers, it is well suited for exchanging large amounts of money. After all, she says, unless you have a big limit on an account, it is hard to make a $20,000 payment by credit card in Canada today.

Another factor that favours the cheque is that one doesn't need to know any of the receiver's bank details to complete the transaction, with just the name sufficing.

"With some of the electronic payment methods, you need to know how to route it to me, what my account number is, what the branch number is, etc.," she says, "so there's a little more complexity."

And, as many parents can no doubt relate, just try paying for a child's school activities, among other things, electronically.

"I write a lot of cheques, for pizza lunch, for the field trips, for soccer, because that's the only way that I can pay," Ms. Hutchison says.

This situation may be one that changes in the near future. According to Louis Georgakakis, marketing director for Pivotal Payments in Montreal, technology is providing us with more options online. Those will only become more ubiquitous with the Canadian adoption of payment platforms such as Apple Pay, a smartphone-paying platform which recently signed on with Canada's big five banks.

He acknowledges that small-business owners and micro merchants who deal with less than $1,000 a month in payments, such as gardeners, babysitters or personal trainers, often don't find it feasible to accept digital payments. However, he says "this mindset is also changing with alternative payment methods such as peer-to-peer payments and mobile wallets becoming mainstream."

The ability to deposit cheques by snapping a picture of them on a smartphone has made the process more convenient, though. As Ms. Hutchison acknowledges, that technology has seen cheques advertised for the first time in many years in North America and it has "probably extended the life of cheque as a payment type in Canada because we've made it easy to deposit and maybe a little bit cool."

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