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Articles Cheques Added to the Endangered ListOriginally appeared in the November 17, 1992 issue of The Globe and Mail, Canada's National Newspaper "I'm sorry, we can't issue that cheque until our treasurer comes next week." That excuse won't hold much longer in medium-sized businesses. Electronic data interchange (EDI) and other new forms of electronic banking in Canada are changing all that. If that company used EDI, while its treasurer was on the road, the electronic version of the purchase order would have caused a corresponding electronic "cheque" to be issued automatically. "When you have people pushing buttons, the system isn't 100 per cent EDI," said Craigg Ballance of the Royal Bank of Canada. Mr. Ballance is chairman of a banking industry committee called Intercorporate EDI. "We have cases where nobody is pressing buttons at all; that's where it should be going --- the humans should be at the front end, making sure you get the best agreements before the transactions take place." But could that travelling treasurer plug his notebook computer into the phone line in his Houston hotel room and approve that electronic purchase order? Mr. Ballance says he could, but it isn't likely. "You won't have a guy on the road with a notebook computer; if that's happening, you're only halfway toward EDI." Electronic banking --- and especially EDI --- could have widespread implications for the way we do business. "I think the elimination of cheques, at least a lot of them, is what we're moving toward," Mr. Ballance said. We could see the gradual disappearance of cheques even before full-fledged EDI is accepted by most businesses. "A lot of what people call EDI is actually electronic funds transfer," said Ray Darke, the Bank of Nova Scotia's senior vice-president in charge of automated services to business. "Real EDI changes the whole way you do business, " he said. The linking of the EDI system of General Motors of Canada Ltd. To their just-in-time delivery system is an example. While EDI may replace business cheques, the introduction of the debit card could eventually replace personal cheques. "The [debit card] transaction works like an electronic cheque," said Brian Piwek, president of Overwaitea Food Group of Vancouver. In 10 of Overwaitea's Save-On-Foods stores, debit-card terminals installed by the Canadian Imperial Bank of Commerce went on line in September. "Customers don't need cash or a cheque book." The advantage is that any major banking machine card will also work as a debit card. "If you have a banking machine card, you're hooked up to the debit-card system," said Stephen Higgins, the Royal Bank's national sales manager for card services. "We believe that debit cards are going to be strong competitors to cheques, and also they are going to be strong competitors to cash." For Canadian businesses, the decline of cheques began when industry giants such as Oshawa, Ont. Based General Motors and Provigo Inc., the Montreal-based grocery chain, required that all their suppliers adopt EDI to transfer funds and documents electronically. Now Eaton's of Canada Ltd. and Canadian Tire Corp. Ltd. are also going to EDI. But cost savings from using EDI instead of cheques is also driving the move. "The average business cost for a cheque is about $30 to $50", Mr. Ballance said. "If one corporation generates a payment to another business, the general cost of bank charges, postage, printing, reconciliation, lost items, disagreement over the transaction costs about $30 to $50, according to the U.S. cash management industry." IBM Canada Ltd., which offers EDI network services to its customers, used EDI internally to cut the cost of corporate payments in half at one of its Toronto locations. Electronic banking is also plugging into home computers and telephones. The Toronto-Dominion Bank has a computer program called Business Window, which lets customers access all their electronic services from an IBM-compatible microcomputer with at least a 10-megabyte hard drive and a modem. The program is free to customers; the bank charges only for each electronic service used. One of the programs can issue documentary letters of credit to overseas suppliers, another can do electronic funds transfer anywhere in the world. Som Mosur, the TD Bank's vice-president in charge of systems, said that the bank encrypts, or codes both the data and the line to ensure security on electronic transfers of funds. The Bank of Nova Scotia's entry into computer packages for small businesses, Scotia Business Link, will create interfaces to DacEasy and ACCPAC accounting programs for their customers' personal computers in January, according to Mr. Darke. But home computer banking isn't widely used yet. With penetration of personal computers into homes running at 18 per cent, the Royal Bank is looking at home banking pathways other than computers. "Telephone banking is a much more powerful banking tool; and automatic teller machines are just about on everyone's doorstep, so the cash problem has been met," Mr. Ballance said. And telephone banking is where the CIBC is putting its new electronic services. In March, they became the first financial institution in Canada to offer customers a national automated telephone banking service. The CIBC's Link Up service lets customers pay bills, check their account balances, transfer money between accounts, and make payments and inquiries to their Visa account. Carl Stieren is an Ottawa-based writer and computer consultant. |
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