I vividly remember the first time I used a cheque – I had just received my first salary in 1999, and the thrill of writing out a cheque with my name on it is something I will never forget.
Many South Africans have similar fond memories of their first ‘paper’ pay cheque, or can tell interesting stories about a cheque they offered as payment.
A visit to the Absa Money Museum in the Johannesburg CBD captures the wonderful history of cheque evolution. Among the earliest on display are those used in the former Cape Colony, dating back to the second half of the 19th Century. In order for the cheque to have a monetary value, it had to be endorsed with a one pence revenue stamp.
Since then, cheques have advanced in a variety of different forms – examples of which can be seen in the museum.
Giant prize-giving cheques have become something of an institution at sport and fundraising events, even though these ‘cheques’ are effectively only tokens with no real monetary value.
So it was with a tinge of mixed feelings that Absa made a business decision to exit cheques as a payment instrument by the end of this year.
Although we will continue to honour all third-party cheques deposited for the foreseeable future, there is a general acknowledgement that an industry sunset is imminent.
We realise that this decision may come as a surprise to some South Africans – including our loyal customers – who are still using this method of payment. It begs the question: why take such a seemingly extreme decision?
Cheques are one of the oldest recognised payment instruments globally, including in South Africa, and were historically widely used. However, with instantaneous digital payment methods becoming increasingly popular, cheque usage has been declining. Compared to a decade ago, cheque volumes have fallen approximately 80%.
Today, a very small number of our customers still use cheques to pay their bills. Among others, they include some business clients, a handful of government departments with entrenched payment policies, and customers who prefer cheques to alternative methods, notwithstanding the inherent risks.
As part of efforts to improve risk management, and in consideration of the ongoing decline in the use of cheques, the Payments Association of South Africa, in association with the South African Reserve Bank National Payment System Department, reduced the maximum value for which a cheque may be issued from R5 million to R500 000 eight years ago. On May 1, the cap was again lowered – this time to R50 000.
Currently, bank charges for processing cheques are relatively high, making it an expensive form of payment. Moreover, with the need for verification and validation, it can take up to 10 days for a cheque to clear. This extended timeframe makes the process more open to abuse and fraud.
It is against this background that we decided to sunset cheques as a payment instrument, while being mindful of the impact this will have on customers. To minimise disruption to clients, the process will be managed in a phased manner with clear communication throughout.
Depending on the type, value and timing of the payments a client would like to make, various alternatives are available, including internet and mobile (app) banking, text-based cellphone banking (USSD), card payments, debit orders, electronic fund transfers (EFTs), ATM and Chat banking. These options are safer, convenient, and more efficient than cheques.
For clients using cheques to draw money for petty cash or to pay cash wages of less than R5 000, the CashSend money transfer service is an option. For larger cash transactions, clients can still use any of our cash branches. Alternatively, cash can also be withdrawn at an ATM. However, for wage payments, we encourage clients to open a bank account and to pay wages by EFT.
Customers with ‘cheque accounts’ can rest assured that the decision to exit cheques will have no impact on their ability to transact in these accounts or the functionality thereof, even after the sunsetting occurs.
Despite the decline in cheque usage, the term ‘cheque account’ is still widely – and interchangeably – used across the industry when referring to current and transactional accounts.
While it is not without a hint of sadness that we wave goodbye to a once-popular payment instrument, we truly believe that our decision to sunset cheques will put us in the best possible position to protect our clients, while offering efficient and cost-effective payment alternatives. This is even more important during the time of Covid-19, when physical contact is discouraged.
The reality is that rapid, continuous improvements in the payments universe have long marked the incremental, but steady decline of cheques. Bidding farewell to this old form of payment ultimately provides an opportunity for people to embrace safer, more efficient transactional tools. In the immortal words of author Mark Twain, “continuous improvement is better than delayed perfection”.
The time to bank safer and smarter is now.
Bongiwe Gangeni is deputy chief executive of the Retail and Business Bank at Absa Group.