Cheques a write-off, FNB informs clients
● FNB has announced that it will stop issuing cheques from September 1 this year — yet another sign that chequebooks are dying out as consumers embrace digital banking.
“South Africa has seen an annual decrease of 30% in cheque usage,” says Kenneth Matlhole, FNB business product head. He says cheques make up less than 0.1% of SA’s “total payments ecosystem”.
“During level 5 lockdown, volumes decreased by 80%, and we have seen businesses continue to adapt to more digital and secure options of transacting.”
Customers who still use cheques have been given a sixmonth grace period to adapt to alternative forms of payments.
Absa began discontinuing the issuing of chequebooks on July 1 this year. FNB and Nedbank will start the process from September 1. Standard Bank says it still issues and accepts cheques on behalf of its clients but is engaging at industry level and will align its cheque strategy with what it refers to as a co-ordinated and phased approach.
“Cheques are one of the oldest recognised payment instruments globally, including in South Africa, and were once a popular form of payment, particularly in cases where large payments had to be made and paying with physical cash would have been impractical,” says Bongiwe Gangeni, deputy chief executive of Absa’s retail and business division.
FNB, Absa, Standard Bank and Nedbank all say that the majority of those who still use cheques are business owners. FNB and Standard
Bank say the entities that still make wide use of cheques include schools, churches, scrap-metal dealers, NGOs and municipalities.
“Less than 0.5% of our customer base use cheques,” says Matlhole. “From a transactional volume perspective, cheques make up just under 0.1% of domestic payment volumes and 0.15% of values.”
Gangeni says cheque usage has been declining at an average rate of 26% year on year over the past decade, and volumes have dropped about 80% compared to 10 years ago. “They have become uneconomical and commercially unviable.”
Using a cheque as a method of payment is expensive and time-consuming. It costs about R200 to bank a cheque — more than for a cash withdrawal.
FNB charges R210 per cheque, excluding additional cash-withdrawal fees at a branch based on the value of the cheque. The average cost per cheque for an Absa client is about R200. It can take up to 10 days for a cheque to clear due to centralised processing, 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,” says Gangeni.
Due to security concerns particularly relating to fraud, payment limits for cheques have been reduced.
On May 1, the Payments Association of SA, in association with the Reserve Bank, decreased the amount allowed from R500,000 to R50,000.
‘We have seen businesses adapt to more digital and secure options’