03

In 1987, Australian tennis player Pat Cash triumphed at Wimbledon, defeating Ivan Lendl of Czechoslovakia in the final. The Sun Sentinel, a Florida newspaper, ran a clever headline: “CASH BETTER THAN CZECH”, playing on Cash’s name and Lendl’s nationality. While the pun made for a witty headline, today it could well reflect a deeper truth—cash is indeed outperforming cheques in the modern financial ecosystem.

The Bank of England printed the first cheque in 1717, pioneering the use of pre-printed forms on special “cheque paper” designed to prevent fraud. Back then, there were no cheque books—customers had to collect a numbered form in person, fill it out, and return it to the bank for settlement.

By around 1770, the first bankers’ clearing house was established in London. Until then, bank clerks manually exchanged cheques by visiting every other bank, tallying balances informally. The clearing house streamlined this process. Clerks would meet at the Five Bells Tavern on Lombard Street to exchange all cheques in one place and settle accounts—laying the foundation for the modern clearing system.

Over time, the cheque evolved into a legal Bill of Exchange and became central to banking transactions worldwide. In India, cheques were first used by the Bank of Hindustan—the country’s first joint-stock bank—established in 1770. However, it wasn’t until 1861–62, when banks began catering to the broader public, that cheques gained popularity. The operational framework was formalized with the enactment of the Negotiable Instruments Act in 1881.

Despite this 250-year legacy, the cheque’s relevance is rapidly declining in the face of digital banking and electronic payments. This once-crucial piece of paper—elegantly designed with watermarks and security features—is slowly becoming a historical artifact. There was a time when visiting a bank was an event. The cheque book and passbook were prized possessions, carefully stored and carried to the branch. Writing a cheque demanded precision—one had to dot every “i,” cross every “t,” and inscribe amounts and dates accurately, followed by a signature that matched bank records.

At the bank, customers were handed gleaming metal tokens to mark their queue position and identity. Meanwhile, behind the counter, staff consulted tattered cardholders with decades-old signature samples, scrutinizing cheques like detectives. If the signature passed inspection, the customer received a wad of cash. If not, they were summoned to the accountant’s desk to hear the unfortunate news of a rejected cheque. While this process had a certain charm and human touch, it’s now increasingly rare. Two decades ago, about 95% of banking transactions in India were cheque-based. Today, that figure has dropped below 10%, with digital payments taking center stage. Countries like Finland, Denmark, and New Zealand have eliminated cheques from their banking systems. Even the U.S. Federal Reserve is phasing out paper cheques for government fund transfers by September 30, 2025. The reason for this shift lies in the unfavourable cost-benefit ratio of cheques. Printing, dispatching, and storing paper stationery is expensive. Add to that the hassle of writing a cheque, physically delivering it, and processing it through the banking system, which can take up to 36 hours.

Compare this to digital payment platforms like IMPS, NEFT, RTGS, and UPI, which offer instant, 24x7 global settlement. Signatures are replaced by secure logins, OTPs, and encrypted internet protocols, making transactions seamless and efficient.

The Automated Teller Machine (ATM) was introduced in India in 1987, offering “Any Time Money” and promoting convenience and flexibility. With the expansion of ATM networks and the National Financial Switch (NFS) enabling interoperability, fewer customers needed to visit bank branches for cash withdrawals or passbook updates. This laid the groundwork for a broader digital transformation that gained full momentum post-2016.

The 21st century has seen a dramatic shift in payment preferences. According to the Federal Reserve, cheque usage in the U.S. peaked in the mid-1990s. By 2009, it had declined to 33 billion cheques, less than half of its peak volume. By 2023, nearly half of Americans hadn’t written a single cheque in the past year.

Yet, cheques are not entirely obsolete. In business-to-business (B2B) transactions—particularly in the U.S.—cheques still account for 40% of payments. While digital solutions dominate everyday personal transactions, cheques continue to serve specific roles in the financial ecosystem.

From their historic origins to their pivotal role in modern commerce, cheques have been instrumental in shaping the global economy. As digital payments redefine financial interactions, cheques may continue in a niche capacity—or fade into history. Only time will tell whether this 250-year-old patriarch gracefully yields to a tech-savvy 10-year-old upstart, or finds a way to coexist in a hybrid world.