Popularity of cheques wanes

For the first time, electronic payments appear to be stealing a march on their paper-based rival, the cheque.

How electronic payments have become more popular

1995: 1.14bn cheques, just 753m automated payments

2001: 1bn cheques, 1.1bn automated payments

Automated clearing house BACS said last year businesses made 1.1 billion automated payments, and signed one billion cheques.

Seven years ago, in 1995, businesses made just 753m automated payments. Cheques were overwhelmingly favoured, businesses wrote 1.14 billion during that year.

However, some campaigners believe financial incentives offered to individuals who pay by direct debit penalise the poorest in society.

Popularity spreads

BACS (previously known as Bankers Automated Clearing Services Limited) processes direct debits, direct credits such as salary payments, and standing orders.

About 90% of salaries in the UK are currently paid by direct credit, while more than half of businesses use it to pay suppliers.

BACS spokesman Anthony Sherick said: "Businesses already have facilities in place to pay employees electronically and now they are using the service to make many other payments, such as supplier, dividend and employee expenses payments."

Last year there was a 15% increase in businesses using direct credit to pay suppliers.

Financial incentives

Many utility companies now offer financial incentives to individuals when payments are made by direct debits.

While these discounts are welcomed, people who prefer paying by cheque are excluded.

In addition, people who do not have a bank account and pay with cash, or have a pre-payment meter can not benefit from these reductions - and can often be the most needy.

Karl Brookes of Consumer Watchdog Energywatch, said: "Competition had been really good for direct debit consumers but less to those on pre-payment meters or those who pay by cheque."

One energy company TXU plans to introduce a 9.5% charge for late payments.

Mr Brookes said that this could indirectly penalise people who paid by cheque, as there was a greater chance that they would be later with payments.