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More SA banks phase out cheques in digital drive

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 23 Jul 2020

More South African banks are phasing out cheques, as digital solutions become the norm.

This week, Nedbank became the latest bank to announce it was discontinuing the use of outdated cheque payments.

In a statement, Nedbank says in line with major players in the banking industry, it is phasing out cheques, as clients move to more secure and cost-effective payment methods.

Earlier this month, FNB announced it will be discontinuing the issuing of cheques by 1 January 2021.

FNB said customers who still use cheques have been given a six-month notice period to adapt to alternative forms of payments.

In June, Absa said it will stop issuing new cheques from the start of July, saying cheque volumes in SA have fallen by 80% compared to 10 years ago, making the once popular payment method uneconomical and commercially unviable.

According to Anton de Wet, chief client officer at Nedbank Retail and Business Banking, the gradual discontinuance of cheque issuance and acceptance by the bank is in response to steadily declining demand for, and acceptance of, cheques as a payment mechanism by South African consumers and businesses in recent years.

“Most of our customers have migrated to more secure, convenient and cost-effective digital and card-based payment solutions,” De Wet says.

“We have noticed a steady reduction in requests for, and use of, cheque books and bank-issued cheques. The outbreak of COVID-19 has exacerbated the decline in cheque usage tremendously and even with the increase in economic activity under relaxed lockdown conditions, we have seen previous users staying away from cheques and moving to digital and card payment solutions.”

He explains that the first phase of the process, which begins on 1 September, will see Nedbank no longer printing or issuing new cheque books or offering bank-issued cheques.

The bank will also no longer be offering special clearance on cheques from that date, nor will it return any physical cheques used by clients to them with their monthly statements.

Electronic images of these cheques will, however, still be available on request, says the bank.

“Our clients are still able to make cheque payments for now, and Nedbank will continue to accept cheques as payment from our clients and customers of other banks,” De Wet says. “Nedbank intends to phase out the usage of cheques completely during the course of 2021, and we will keep our clients informed of any developments in this regard.”

Aart Jurriaanse, Nedbank’s divisional executive for transactional information solutions, points out there are many alternative electronic payment methods that are cheaper, safer and more convenient than cheques, including electronic fund transfers or card, mobile and app-based payment solutions.

Changing parameters

FNB says its decision follows the declining use of cheques locally and globally, coupled with the recent announcement made by the Payments Association of South Africa to reduce the maximum value of cheque limits from R500 000 to R50 000 in May this year.

Kenneth Matlhole, FNB Business product head, says, as of 1 January 2021, FNB clients will no longer be able to issue cheques.

However, the bank will still honour other banks’ cheque payments until further notice.

“South Africa has seen an annual decrease of 30% in cheque usage, making cheques contributing less than 0.1% of the total payments ecosystem in South Africa,” Matlhole says.

“During level five lockdown, volumes decreased by 80% and we have seen businesses continue to adapt to more digital and secure options of transacting.”

Over the years, FNB has encouraged clients to migrate to safer, faster and more cost-effective payment mechanisms, such as electronic funds transfer, mobile payments, online banking and card payments.

Signatory complication

Meanwhile, in an e-mail to ITWeb, Standard Bank says it still issues and accepts cheques as a payment method.

The bank still uses cheques across the industry and aligned with its client base, mostly public sector clients (schools, local municipalities, universities); motor vehicle dealerships; churches and NGOs; food producers; small retailers; scrapyard entities; and individuals.

Standard Bank explains that the reason for cheque issuing or acceptances is the entities’ business practices requiring multiple authorisation or signatories.

However, it says during 2019, less than 3% of the current account client base had issued a cheque as a means of payment.

“Standard Bank, like the rest of industry, is experiencing a continued decline in cheque volumes driven by the change in client behaviour in adopting alternative payment methods,” says the bank.

“However, with the COVID-19 lockdown, we have seen a material reduction in volumes. Standard Bank continues to engage at industry level and our cheque strategy will align with a co-ordinated industry phase-out plan in order to help our clients transition, especially given the business processes changes that will need to take place across all stakeholders.”