Death nears for the venerable cheque

Once a mainstay of transacting, the humble chequebook is on the verge of becoming a banking relic, data from SA’s big banks show. By Craig Wilson.

SA consumers have all but abandoned the chequebook as a means of payment, with corporate use declining severely in recent years, as technology takes over.

Apart from the obvious security problems with cheques, the lower cost and added convenience of electronic channels mean chequebooks could soon join audio cassettes and the telegraph as items only seen in history books.

Arrie Rautenbach, head of retail markets at Absa, says the SA banking industry has experienced a sharp reduction of about 20%/year in the number of cheques processed over the past five years. He adds the “vast majority” of all cheques issued and received by Absa are commercial or corporate rather than personal.

“Despite the steady reduction of cheque volumes in SA, cheques remain a vital transaction mechanism to certain customers,” says Rautenbach.

First National Bank, meanwhile, says it has seen cheque volumes decline by more than 70% in the past decade. “The decline has been led by consumers moving away from cheques to … card and electronic products,” says a bank spokesman.

The spokesman adds that many consumers have moved to electronic payments because they are far more affordable.

Like Absa, the majority of cheques issued by FNB customers come from its business account holders. FNB says its cheque processing costs are increasing above the rate of inflation, “but there is a significant volume decrease”.

At the end of last year, the Payments Association of SA reduced the maximum permitted value of a cheque from R5m to R500 000, further limiting their usefulness to large corporate clients.

A Standard Bank spokesman says the bank has seen chequebook orders falling by 17% year-on-year over the past four years and that the largest drop occurred in the last 12 months. Between January and May last year, and the same period this year, orders dropped by 29%.

Last year, Standard Bank decided to begin actively diverting customers to electronic payment mechanisms rather than cheques, a move that is further encouraging the decline.

Nedbank wasn’t willing to disclose any data, citing confidentiality.

If the trend continues as it has, it is likely that cheques will disappear within a matter of years, with even large corporate clients turning completely to electronic channels, both because of stricter regulation and because of the convenience, efficiency and traceable nature of electronic payments.  — (c) 2012 NewsCentral Media