In Ireland, it's cash or cheques only

We had a great meeting of the Financial Services Club in Ireland last week, looking at the way in which payments infrastructures need to change to cope with SEPA mandates and requirements.

Pat McLoughlin, CEO of the Irish Payment Services Organisation Limited (IPSO) and Gilbert Lichter, Secretary General of the Euro Banking Association (EBA) outlined the issues and opportunities for SEPA and payments in Ireland.

Through the course of the evening, there were clearly differences in the views of Pat and Gilbert in how geared up Ireland is for SEPA, particularly the ups and downs of moving Ireland’s payments markets from their traditional bilateral clearing operations into a pan-European structure.

I was intrigued by Pat’s slides for example, which he has kindly said I could share.

Take note particularly of slides 5-9 which outline Ireland’s dependency on paper payments, and slides 11-20 which show this against the backdrop of other European countries and their usage of paper and electronic payment instruments.

What it shows is that Ireland is still extremely reliant on paper payments, particularly cash and cheques.

Ireland has historically had a policy of such usage, and the government has actively discouraged electronic payment until recently by taxing citizens for using debit and credit cards.  This is illustrated by Slide 5, which shows that the volumes of paper payments processed have remained remarkably constant during the last four years.

Equally, I was amazed at Slide 9 that shows the use of cash per capita has been surging between 2006 and 2007.  Is this the result of the credit crisis I wonder, or the fact that every newsagent, post office, public house and field in Ireland has recently seen off-premise ATMs deployed?  If you don’t know btw, Ireland has more ATMs than any other country in Europe per capita, as illustrated by Slide 11.

Therefore, although card values are rising, cash is still dominant (Slide 12).

Cheques are also rampant and Slide 13, 14 and 18 put this in context. They are also fascinating slides in their own right.

For example, slides 13 and 14 show that whilst Ireland’s use of cheques is not as bad as France, the value of cheque is massive. This implies that cash is traded for general sundries and small trading, whilst cheques are for the big stuff.

Slide 18 particularly speaks volumes, as countries such as Britain and France have actively been targeting the reduction in the usage of cheques. 

In the UK for example, we have many firms that decline cheques completely or will only accept them with a high processing fee or value.

France has seen cheques reduce from over half of all payments in 1990 to under a quarter today, and it’s reducing further.

Ireland’s cheque usage remains constant – another sign of a government that has encouraged paper payments by discouraging electron ones, and a culture where paper is more trusted than bytes.

The other charts and stats are also worth reviewing.

Bottom-line is that Ireland has enough challenges managing their country through this crisis, with sovereign debt issues and budget deficits that concern us all. 

Meanwhile, if the population don’t trust their banks or politicians – which they don’t – then the cash and paper economy will continue to flourish for the foreseeable future.

As my Irish shopkeeper said to me recently when I went in with some sterling: “Now then sir, would you like me to euronate that?”

Comments

[Russell Burke]

Hi Chris

Russell from IPSO here. Would just like to clarify that Slide 11 in the presentation actually refers to "ATM cash per capita", rather than the number of ATMs. According to the latest ECB tables, in 2007 Ireland had 744 ATMs per 1 million people, respectably close to the EU average of 806. So while the number of terminals is acceptable, by God do we use 'em!

[Jeremy Kidd]

I work in cash management at a large MNC based in the US. Our colleagues from Europe often come over and chide us in the US for our check use. It's refreshing to see that there are in fact parts of Europe with the same struggles. We have a shocking number of corporate customers paying us by cheque and it often becomes a relationship issue. We're trying to push our customers to pay us electronically, but we won't sacrifice our relationship with them to do it. I think the biggest barrier to declining cheque use in the US among corporates is float, or the illusion of it. We need to take those extra few days of value. We also have a very efficient Lockbox process here that actually makes cheques a very efficient solution. Many corporations have very high hit rates to clear invoices through paper cheque lockbox processes. As long as that's so prevalent, and not broken, there won't be a lot of demand to 'fix' it.

[Chris Skinner]

@Russell

Must be mistaken from my side then, as I'm sure someone told me there had recently been a massive uptick in the number of ATMs deployed across Ireland.

@Jeremy

Good insights, thanks as always

Chris

[Russell Burke]

Chris, there was a big increase, but perhaps just not(that) recently. Biggest annual jump was from '03 to '04 (38%), probably reflecting the rapid deployemnt of in-store ATMs. In case anyone is interested, here are the figures for the last few years:
2003 - 1,914
2004 - 2,648
2005 - 2,944
2006 - 3,054
2007 - 3,240
2008 - 3,404