The demise of the chequebook

Early this month, Finance Minister Tito Mboweni wrote in a comical manner on his Twitter account that he is probably one of the few remaining people who still insist on writing a cheque, adding: “You can’t get rid of us. Sorry!” His sentiment of being among the “few” holds true, information from the Payments Association of South Africa (Pasa) shows. There has been a marked decline in the use of cheques and it’s still unclear whether this form of payment will survive the ever-evolving technology age. 

Pasa said that the use of cheques has been declining at a rapid rate — about 30% year on year for the past decade. This is because of the shift in consumer habits, with South Africans “opting for the convenience and safety of digital payments”.

Back in the day, cheques emerged as a solution for people who did not want to carry large sums of cash on them. But these days there are cards and banking apps, which prove to be more convenient, safer and allow faster transactions than writing a cheque.  

Bongiwe Gangeni, deputy chief executive of retail and business banking at Absa, said cheques are one of the oldest recognised payment instruments globally and were once a popular form of payment, particularly in cases when large payments had to be made and paying with cash would have been impractical. 

“However, with the ever-increasing adoption of digital payment instruments, such as cards and electronic fund transfers (EFTs), cheque usage has been declining over the past decade,” Gangeni said. “Cheque volumes have dropped roughly 80% compared to 10 years ago, and have become uneconomical and commercially unviable. Ageing industry infrastructure is also approaching the end of its life cycle.” 

This month, it was reported that Absa will stop accepting cheque payments by December this year. Its decision comes after Pasa and the South African Reserve Bank announced that the maximum amount payable by cheque would be reduced from R500 000 to R50 000, effective from last month, to manage the risk associated with using them. 

The bank said it will ensure minimum disruption to customers by allowing for a phased approach. From July 1, new cheque books will no longer be issued to Absa customers.

Gangeni said only a few thousand customers (representing a small minority of its customer base) still use cheques as a payment instrument. 

Standard Bank told the Mail & Guardian that, during 2019, fewer than 3% of its current account client base had issued a cheque as a means of payment.

Kuben Chetty, head of client solutions, business and commercial banking at the bank said that previously, the use of cheques rather than cash would have been driven by clients’ preference and circumstances. He added that historically clients would have been able to pay up to R5-million by cheque. 

Chetty said most of the bank’s customers who still use cheques are public sector clients (schools, local municipalities, universities); motor vehicle dealerships; churches and nongovernmental organisations; food producers; small retailers; scrapyard entities and individuals. 

One of the reasons some businesses continue to issue or accept cheques could be that an entity’s business practices require multiple authorisations or signatories, said Chetty.

The current average cost per cheque processed is about R200 and it can take up to 10 days for a cheque to clear because of the centralised processing process, which includes verification and validation. “While the payment method allows the payer to delay the transfer of funds, there is significant risk for all other parties involved in the process, including the risk of fraud,” said Gangeni. 

In 2018, the Reserve Bank said the demise of cheques has been driven by neglecting  innovation in this area.

The central bank said that globally, innovation has focused on electronic payments, which are fuelled by the growth of e-commerce, mobile phones and other devices; and access to the internet, including the introduction of significant digital players such as Amazon, Apple, eBay, Google, Paypal, Takealot, Samsung, and the like. 

“Other factors that contribute to the lack of cheque innovation include the lack of interest from fintechs and financial service providers, as well as the lack of consumer demand, as the interest is more focused on allowing mobile phones and other devices to easily access the payment system to effect payments,” it said. 

Tshegofatso Mathe is an Adamela Trust business reporter at the Mail & Guardian

Subscribe to the M&G

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years, and we’ve survived right from day one thanks to the support of readers who value fiercely independent journalism that is beholden to no-one. To help us continue for another 35 future years with the same proud values, please consider taking out a subscription.

Tshegofatso Mathe
Tshegofatso Mathe
Tshegofatso Mathe is a financial trainee journalist at the Mail & Guardian.

Related stories

Too broke for Mboweni to budget

The scramble to find cash for an SAA bailout, Covid-19 grants and civil servants’ demands force postponement of mini-budget

Justice department hit by a costly cyberattack

The theft of R10-million from the Guardian’s Fund account prompts the justice department to freeze all accounts until an audit can determine the extent of the damage

Mboweni to further tighten the belt in his budget

The finance minister will cut departments’ allocations according to their cloth as one measure, and savings will have been made from underspend during the lockdown

State can’t yet afford wealth fund

Despite the government’s announcement of a R30-billion sovereign wealth fund, analysts are questioning its utility in a time of increasing debt

Mboweni faces taxing decisions

The finance minister must tread a tightrope to fix the economy as he prepares for next week’s budget speech

Conscious capital is critical to future-proofing Africa

Business leaders must wake up to the fact that they can ‘do good’ and still make a profit

Subscribers only

Toxic power struggle hits public works

With infighting and allegations of corruption and poor planning, the department’s top management looks like a scene from ‘Survivor’

Free State branches gun for Ace

Parts of the provincial ANC will target their former premier, Magashule, and the Free State PEC in a rolling mass action campaign

More top stories

Baby Awa: The miracle baby born on a boat fleeing...

More than 300 000 people in the north of the country have been displaced by militants who ransack villages and then burn them down.

Five suspects arrested in Senzo Meyiwa case

Police minister Bheki Cela announced on Monday that his team has arrested five suspects who were allegedly involved in the killing of former Bafana Bafana captain Senzo Meyiwa.

EFF eyes municipalities ahead of 2021 local government elections

EFF leader Julius Malema says the party is preparing to govern in many municipalities from next year. It is also launching a programme to defend the rights of farm workers

WSU suspends classes and exams to avoid the spread of...

The university says it has to take the precautionary measures because 26 students have tested positive on its East London campus

press releases

Loading latest Press Releases…

The best local and international journalism

handpicked and in your inbox every weekday