Slow march from the paper trail of cheques to making online payments

Cheques are an anachronism in the public sector following "E-day" in September since which it will not accept cheques from or write cheques for businesses. But consumers are clinging to their cheque books, with usage of personal cheques declining at a much slower rate than business cheques.

In 2012, some 27 million personal cheques were written and consumers are expected to write 23 million this year.

According to a study by the Central Bank, 41 per cent of personal cheques are for €100 or less and 77 per cent are for €500 or less. Half of these cheques are sent to businesses; 41 per cent to other consumers; 7 per cent to public sector bodies; and the remaining 2 per cent to unincorporated bodies such as clubs and charities.

Cheques are not cheap to use. Lodging one in a Bank of Ireland account, for example, will cost you 40 cent to process.

If you want to write cheques, it will set you back €5 for each book of 25 cheques with the bank – and €12.70 for each bounced cheque. Government stamp duty of 50 cent per cheque also applies. Post the cheque and you will pay an additional 68 cent for a stamp.

Yet Irish people are holding fast to their cheque books. A survey from Accenture last year showed that just 10 per cent of smartphone and tablet users in the State are using mobile payment services even though 65 per cent said that they were aware of such services.

Security is a concern for many. Realex, for example, says that its personal accounts' funds are held in segregated client bank accounts at regulated financial institutions in accordance with the Central Bank of Ireland's prudential requirements for payment institutions and "are never used for any operational purpose".

Hacking is another concern. With high-profile hacking into iCloud accounts hitting the news recently, Irish consumers may be reluctant to embrace the move to so-called mobile or digital wallets, even though security levels are akin to those around online banking or ecommerce transactions.

Just as online banking took some time to gain favour with the public, it’s likely that people will need some time to become accustomed to mobile payment and happy to use it regularly.

John Collison, the young Limerick-born co-founder of payments platform Stripe, says mobile wallets are like e-commerce was in 1995.

"Amazon was one of the big companies that made people feel OK to put their credit cards online," he told the New York Times in October, adding that Apple will do the same for the mobile wallet.

Mobile banking apps

Last year Bank of Ireland was the first Irish bank to bring a mobile payment service to market but the other banks soon followed.

Mobile banking apps allow you to transfer money to someone simply by using the mobile number of the account holder.

So, if you have an electrician doing some work in your house, or you want to send a cheque to your niece for your birthday, rather than using a cheque you can transfer money to their account. This makes the process of sending money to friends and family a lot easier than having to log in to your online banking account, find out the recipient’s bank details and then send the money, particularly since the arrival of Sepa (single euro payments area), which means that you now need to know the recipient’s IBAN and BIC numbers – both long very numbers – to transfer money. It also reduces the need for a cheque.

There a couple of catches however. The person to whom you want to send the money must first have registered for the service and you will have to download your bank’s mobile app.

With Bank of Ireland, for example, to receive money you don’t have to have downloaded the mobile app, but you will need to be a 365 online customer and you will have to have registered your account and mobile number for Pay to Mobile.

Typically you’ll incur no additional cost for using this service with standard current account charges applying, while Allied Irish Banks has waived fees on its Me2U service until November 28th.

The other catch is that there is a limit on how much you can send in one transaction. Permanent TSB for example, allows you to transfer €150 per transaction and up to €500 a day.

BoI imposes a limit of €100 per transaction or €300 per day, though you can receive up to €600 a day from other users. Ulster Bank only allows you to transfer €250 a day in total. AIB allows you to transfer €300. KBC Bank does not currently have such a service.

This means that using such an app to pay someone for work in your house or at the garage may not suffice.

In addition, you may not be able to pay in this way people who don’t bank with the same bank as you. Ulster Bank allows you to transfer funds to anyone who has a valid Visa debit, credit or prepaid card using just their mobile number, as does AIB and PTSB. BoI, however, accepts payment to another BoI account only.

Pros: It's so easy to use Cons: Daily limits may preclude use for larger payments

Realex Fire

Irish company Realex launched its mobile payments product, Fire, last year and since then has been operating in a “soft pilot mode”, with a small number of active users.

However, according to a spokesman for the company, it will launch a new version soon, with innovations such as the introduction of a business account and features such as foreign exchange and a personal financial management tool.

If you want to check out the service, you can log on to realexfire.com, create an account and download the mobile app.

You will then be able to transfer funds from other banks accounts, create a circle of people that you pay, send payment requests, pay people, and get notified on Facebook when payments are made.

You must know the exact email address or mobile phone number to invite someone and, if the person you invite is not a Realex Fire user, you can send them an invitation to join Realex Fire.

You can send a payment to any UK or Irish mobile phone number and the recipient will be notified by text message that the payment has been made and they will be prompted to download the Realex Fire app to accept the payment.

The company doesn’t charge transaction fees on its personal accounts and has a daily limit of €25,000 a day.

Pros: Realex doesn't have any transactions charges Cons: The person you wish to pay will also have to have a Fire account

Paypal

It may have first come to prominence for shopping on auction site Ebay, with many people choosing this platform to send or receive money but, while it may be more associated with online shopping, Paypal now offers customers much broader payment services.

Once you have a Paypal account, you can send money to almost anyone with an email address and you don’t have to disclose your financial information with the recipient to do so. You just need their email address to transfer money.

It says security is tight. According to Paypal, “Every eligible transaction is protected by advanced encryption and 24/7 fraud monitoring.”

The advantages of Paypal are many: it’s an easily recognisable name, with a good security record and fees can be low. For example, it’s free to open a Paypal account; it’s free to transfer money from your account to your bank account; and it’s also free to add money to your Paypal balance from your bank account.

However, if you are transferring money from a debit or credit card a fee applies – 3.4 per cent plus 35 cent.

This means that if you fund your account with €500 from your debit card you will pay a fee of €17.35, for example.

Another advantage of Paypal is that it can be used for international payments. However, currency transaction and cross border fees will apply, which can drive up your processing fees. For example, sending money to the US incurs a charge of 1 per cent when sending from a fully funded Paypal account, or 3.9 per cent plus a fixed fee of 35 cent for a payment partly or fully funded from a debit or credit card.

Pros: It has a much higher limit than Irish bank services at $60,000 Cons: Fees can catch you out if you use your debit or credit account to fund a transaction

Apple Pay/Google Wallet

Launched in the US on October 20th,

Apple Pay

allows you to use your iPhone 6 or Apple Watch to pay for a purchase at one of thousands of US retailers, including Macy’s or Walgreens.

Apple Pay works with Mastercard, Visa and American Express. It keeps your credit card details secret and allows you to pay for goods in a shop, online or in-app.

Whether or not it will make it to Europe remains to be seen, as the European regulatory and e-payments market is quite different from the US market.

Google also has its own payments platform in the US, Google Wallet. If you have a gmail account, you can simply attach money to your email via the “$” sign and send it on. Alternatively, once you have the Wallet app installed – which you can download via Google Play or iTunes – you can transfer money via this app using the recipient’s email address.

The service is free, provided you pre-fund your Wallet balance. If you use a credit card to send money, a 2.9 per cent fee per transaction (minimum 30 cent) applies. It also makes online shopping easier, as rather than filling out lengthy forms, you can just click the “buy with Google” button and you’re done.

If you receive money, it goes straight into your Wallet account, and you can spend it either in store, using your Wallet Card, which is linked with Mastercard; withdraw it from an ATM, again using this card; transfer it to your bank account; spend it on Google Play; or send it on again.

Like Apple, however, there are no plans in place to launch in Europe, and a spokeswoman for Google in Ireland says the tech giant has “no immediate plans to launch in Ireland”.

Pros: What could be easier than sending money via email? Cons: Neither are yet available in Ireland