By Sheikh Nissar
Are cheques slowly dying out? These days, majority of people have made the transition from their cheque books to their debt cards or digital payment options. According to apex bank (RBI), the number of cheque transactions are on decline. Probably, customers are considering doing away with cheque facility in banks, admitting digital transaction method more convenient, secure and hassle free; fostering digital payment unintentionally. The transition of cheques to cards or digital payment is happening, but only for small payments like buying goods and services. The large value payments in India’s payment landscape are yet made through cheque system when India’s payment landscape have witnessed a paradigm shift, albeit. Despite the rise of more secure and efficient technologies like mobile payment, cheque payment is yet at its zenith.
The origin of cheques (or checks) has been a question of discussion among the scholars. Earliest usage of cheques may be traced in ancient Roman trade in the form of “attributio” or as a commercial instrument called “adesha” in Maurayan period, but cheques resembling what we have today are traced back to 9th century Muslim traders. Though, usury is forbidden in Islamic tradition and Muharabah system is admittable vehicle for investment, it may surprise many researchers to know that the Islamic civilization did witness the birth of numerous banking activities including safe deposits, transfers, exchange, drafts and especially the issuance of cheques.
As international trade grew, the traders/merchants were required to travel long distances in personal, perhaps for weeks or months. Unlike today’s world, money doesn’t followed borders in olden days. The flow of payment wasn’t interrupted at international boundaries because the trade was carried out in gold or silver or other valuables. But it was uneasy for merchants/traders to carry baggage of coins they needed to with them for weeks or months. As an alternative, true to form, cheques essentially came about as an alternative to travelling with bulky bags of metal coins. The earliest cheques may have been originated as an “attributio” of Romans or an “adesha” of Maurayans, yet the cheques resembling what we have today are 9th century Muslim trade “sakk”. Cheque, is in fact an Arabic word “sakk’’ which means ‘a written order’. A sakk was a piece of paper with written instructions to the merchant’s bank to make payment from his account; it was redeemable in another city or country, making travel easier and safer, avoiding theft or loss.
The first cheque in history wasn’t that written order which was drawn by an English goldsmith, Lawarence Childs, in the year 1675 in London, but the one is the oldest printed cheque. The first real cheque was that which was drawn by the Prince of Alepo in the tenth century (Saifudawlah al-Hamadani who was on a visit to Bagdad). The story of that cheque was that this Prince wanted to give a present to some people who did not know him. He wrote an order directed to the Excahnger of Bagdad and when they went to encash the money, they knew that the cheque was signed by the Prince whose signature was verified by the exchanger. Knowing that Bagdad was a different state from Alepo, one should expect that a clearing system was in existence by that time. (Islamic Banking and Finance—A Abdul Raheem)
Europeans came into contact with Muslims and their payment methods during Crusades. Until 15th century checks were not in use in Europe because there was an extremely high incidence of fraud in handwritten cheques, that is why, many European cities banned their use or else required both the parties to appear before a bank in person to validate them and avoid any sort of fraud. The method of payment made a real breakthrough in 16th century with the advent of negotiability, or the ability a cheque to circulate among parties. Negotiability is very important concept in international commerce which accords negotiable status to certain documents e.g. the bill of exchange, banknote or cheque. The document accorded negotiable status is a document guaranteeing the payment of a specific amount, either on demand, or at set time with the payer named on negotiable instrument. United States witnessed first cheque towards the end of 17th century while the printed version was introduced in 1762 by British banker Lawrence Childs, which included unique serial numbers on them for record keeping. These numbered cheques made exchange safer and easier.
The format of the cheques continued to evolve as technology developed. When e-commerce has changed our habit of payment, the technology enabled smartphone users to money to one another via registered phone number or UPI addresses. In these small transaction amount person-to-person (P2P) transaction is gaining momentum, made decline in cheque usage, but it couldn’t hurt the amplitude of the cheques.
Sheikh Nissar can be reached at firstname.lastname@example.org
Note: Opinions are personals, not of the institute I’m working for.