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

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

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