Cheques grow obsolete as method of payment

Staff Writer | Friday August 3, 2012 00:00

 

By comparison, Bank of Botswana statistics show that about 935,000 cheque leaves worth P16 billion were issued over the same period, leading analysts to conclude that Botswana is joining the list of countries in which cheques have 'gone out of style'.

EFTs or the paperless movement of funds between banks for payment purposes, have increasingly become the main settlement system for government, corporates and individuals. BIFM investment committee chair, Keith Jefferis, said trend analysis showed that cheques had given way to EFTs.

'Cheques are being replaced by electronic funds transfers (EFTs), particularly for bulk payments such as wages and salaries, but also for general transactions,' he said in a second quarter review released recently.

'Electronic payments are faster, safer and cheaper. Although cheques are convenient for those who are spending money, for the recipient they are risky (they may be dishonoured) and slow (receiving value can take several days). 'They are also expensive for banks to process, and hence the charges for using cheques are high.'

According to Jefferis, the number of EFTs processed through the Bank of Botswana's Electronic Clearing House (ECH) had surpassed the number of cheques settled through the same organ in 2008.

Bank of Botswana data indicates that by value of transactions, EFTs broke cheques' traditional dominance in 2010, being valued at P68.4 billion compared to P44.6 billion. Last year, the ECH processed cheques worth P41.6 billion compared to EFTs worth P78.4 billion, highlighting the change of guard in payment settlement trends.

Jefferis said the trend shift also entailed a move towards card payments at point of sale, which increased to 10.3 million transactions in 2011 from 8.7 million in 2010.

'However, the shift to cards and electronic transactions does not mean we are entirely moving away from cash,' the BIFM investment committee chair said.

'The largest number of transactions was for withdrawals from ATMs, of which there were 19.4 million in 2011.' Jefferis called for the production of data on more modern payment methods such as online purchases using credit/debit cards, and money transfers using mobile phones.

'A comprehensive picture of payments trends will need to include these new channels, which in other countries have been the fastest growing of all,' he said.