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You know you put it somewhere safe but when last did you see your chequebook? Considering what banks charge to write and process cheques, you’d be justified in thinking the financial sector is doing its best to eradicate a payment mechanism that’s at least 800 years old with its roots set in early European cross-border trade. A number of countries – including The Netherlands and Switzerland – have successfully weaned themselves off chequebooks.
However, Britain – which was planning to eliminate them as a payment mechanism by 2018 – has done an about face. Why? Because more than 1bn of the things were written in Britain last year and the country’s Payments Council has decided they should be retained “for as long as customers need them.”
So what about South Africa, where bank pricing structures have been developed to discourage their use? No call has been made as yet, says Walter Vonke, CEO of the financial sector funded Payments Association of South Africa (Pasa). According to Pasa approximately 3,5m cheques – worth R80bn – are written by individuals and companies in SA every month, with 99% of those for less than R500 000. That amounts to 42m individual cheques each year worth more than R1 trillion.
Large companies prefer electronic payments, wary of the skill of fraudsters in altering beneficiaries on cheques. “There’s been a consistent decline of 20% in cheque usage annually over the past decade,” says Vonke. “That’s likely to continue. But the industry has no plans to discontinue them as yet.”
Most cheques in SA are written by businesses, says Absa managing executive of group payments, Willie van Zyl. He says 70% of cheques issued by Absa clients are written by companies and make up 90% of the value of transactions. “Despite the steady reduction of cheque volumes in SA they remain a vital transaction mechanism,” says Van Zyl.
First National Bank says more than 90% of its Gold and Platinum account holders don’t use cheques, but just eight years ago around 50% were actively signing cheques on a regular basis. The demise of the cheque has been speedy: as recently as 2003, 40% of Gold account holders and 60% of Platinum clients wrote cheques while the vast majority now transact electronically.
Standard Bank director of banking products Sugendhree Reddy says though the cheque will eventually become extinct, she wouldn’t put a timeframe on its demise. “Many retailers have already chosen to stop accepting cheques as consumers have adopted the use of debit, credit and cheque cards. ”
While the number of cheques written is falling, the value of individual ones has risen steadily, partly as a function of inflation. For example, in 2005 Nedbank clients wrote 28,5m cheques with an average value of R12 300. Last year 12m with an average value of R21 180 were signed by clients.
Murray Stocks, executive head of Nedbank Corporate Shared Services, says at some point processing cheques will become sub-economic for individual banks, at which point they’ll have to make some revolutionary decisions: either discontinue them or find a way of making them cost-effective. “Over the medium term the only viable option for cheque processing will be the adoption of an industry solution to achieve some efficiency of scale and individual banks will cease their own processing,” says Stocks. That might not sit well with SA’s competition authorities, wary that any suggestion of industry co-operation raises the spectre of possible price collusion.
Sanjeev Orie, head of Product Growth at FNB, says: “Only a small minority of personal banking clients tend to still use cheques. Despite that, the group has no plan in place to phase out cheques.”
However, Britain – which was planning to eliminate them as a payment mechanism by 2018 – has done an about face. Why? Because more than 1bn of the things were written in Britain last year and the country’s Payments Council has decided they should be retained “for as long as customers need them.”
So what about South Africa, where bank pricing structures have been developed to discourage their use? No call has been made as yet, says Walter Vonke, CEO of the financial sector funded Payments Association of South Africa (Pasa). According to Pasa approximately 3,5m cheques – worth R80bn – are written by individuals and companies in SA every month, with 99% of those for less than R500 000. That amounts to 42m individual cheques each year worth more than R1 trillion.
Large companies prefer electronic payments, wary of the skill of fraudsters in altering beneficiaries on cheques. “There’s been a consistent decline of 20% in cheque usage annually over the past decade,” says Vonke. “That’s likely to continue. But the industry has no plans to discontinue them as yet.”
Most cheques in SA are written by businesses, says Absa managing executive of group payments, Willie van Zyl. He says 70% of cheques issued by Absa clients are written by companies and make up 90% of the value of transactions. “Despite the steady reduction of cheque volumes in SA they remain a vital transaction mechanism,” says Van Zyl.
First National Bank says more than 90% of its Gold and Platinum account holders don’t use cheques, but just eight years ago around 50% were actively signing cheques on a regular basis. The demise of the cheque has been speedy: as recently as 2003, 40% of Gold account holders and 60% of Platinum clients wrote cheques while the vast majority now transact electronically.
Standard Bank director of banking products Sugendhree Reddy says though the cheque will eventually become extinct, she wouldn’t put a timeframe on its demise. “Many retailers have already chosen to stop accepting cheques as consumers have adopted the use of debit, credit and cheque cards. ”
While the number of cheques written is falling, the value of individual ones has risen steadily, partly as a function of inflation. For example, in 2005 Nedbank clients wrote 28,5m cheques with an average value of R12 300. Last year 12m with an average value of R21 180 were signed by clients.
Murray Stocks, executive head of Nedbank Corporate Shared Services, says at some point processing cheques will become sub-economic for individual banks, at which point they’ll have to make some revolutionary decisions: either discontinue them or find a way of making them cost-effective. “Over the medium term the only viable option for cheque processing will be the adoption of an industry solution to achieve some efficiency of scale and individual banks will cease their own processing,” says Stocks. That might not sit well with SA’s competition authorities, wary that any suggestion of industry co-operation raises the spectre of possible price collusion.
Sanjeev Orie, head of Product Growth at FNB, says: “Only a small minority of personal banking clients tend to still use cheques. Despite that, the group has no plan in place to phase out cheques.”
