12 July 2011 Last updated at 13:28 ET

Cheques not to be scrapped after all, banks say

Cheque use has dropped sharply since its peak in 1990

The banking industry will not scrap the use of cheques after all, it has been announced.

The Payments Council, a banking industry body, had been planning to replace them by 2018.

However, after widespread criticism from MPs and charities, it has now decided they will be kept "as long as customers need them".

The Payments Council admitted it had been forced to change its mind by the weight of public opinion.

Richard North, the chairman of the Payments Council, said: "It's in the DNA of the Payments Council to consult and listen to all those people who actually make payments and use cheques."

"Listening to over 600 stakeholder groups, working with the banks and following our appearance before the Treasury Select Committee, we have concluded we should reassure customers that the cheque is staying."

Strong defence

The decision was described by the Nationwide building society as a victory for the consumer and a common sense approach.

"Scrapping cheques would have had serious ramifications, not only for the elderly and most vulnerable in society, but also for small businesses and charities that rely on this payment method," the society said.

Cheques in numbers

• 1.1 billion cheques issued in 2010
• Use of cheques has fallen by 70% since 1990
• Further 40% fall expected in the next five years

The industry's search for a "paper-based" alternative to cheques, announced only last year as a way of accommodating critics, has also been cancelled.

"All work to prepare for closing cheque clearing in 2018 has stopped," the Payments Council said.

"Because the cheque is continuing, there is no need for a new type of paper-initiated payment," it added.

Criticism of the industry plan reached a peak this year, with a hostile reception for the idea given by the Parliamentary Treasury Committee of MPs in April, and severe criticism from Mark Hoban, Financial Secretary to the Treasury, in June.

He said there was no "credible and coherent case" for the abolition of cheques before an alternative had been fully tested.

Last year 1.1bn cheques were used, but this represented a 40% decline over the past five years and a 70% fall over the past 20 years.

Andrew Tyrie, chairman of the Treasury Committee, welcomed the Payments Council's decision.

"At last the Payments Council is concentrating on the right thing: making the existing cheque system faster and cheaper to operate. This will benefit both banks and customers," he said.

Michelle Mitchell, charity director at Age UK, said: "We are delighted that the Payments Council has listened to the many people who said how difficult the loss of cheques would be for them."