Cheques to become obsolete

Johannesburg - After the United Kingdom announced earlier this week that cheques would be completely phased out by 2018, the Banking Association of South Africa (Basa) said it was inevitable that the country would follow suit.

Cheque usage has been in decline for a number of years in South Africa. Stuart Grobler, Basa senior general manager of banking and financial services, said once the economies of scale for the use of cheques disappear, it won't be profitable to keep the system in place.

"If the decline in cheque use continues, it's inevitable at some stage that volume versus costs becomes adverse," Grobler said.

Head of corporate communications at First National Bank Virginia Magapatona said electronic banking methods are becoming the norm.

"We have noted a growing preference for electronic transfers among our customers, due largely to the convenience, security and low cost of these transactions," she said. The use of online banking has increased by 20% during the past 12 months.

Newcomer Capitec has never offered its customers cheque facilities.

"Cheques were always an upmarket and never a mass market product," said Grobler. However, upmarket bank Investec also does not provide cheque services.

Hardcore users cling to familiar ways

Among the many disadvantages of the cheque system is that it can be used to perpetuate fraud.

"Cheques have risks because they are pieces of paper that can be intercepted and altered," said Grobler.

He said there was a fairly big increase in cheque fraud of late.

Still, there is a loyal group of loyal cheque users, like the elderly, which distrusts electronic banking.

Countries which follow the UK banking system - like South Africa, Canada, Australia and New Zealand - will be watching what happens there and may take similar decisions soon.

"We've had better alternatives to cheques, but there is still a loyal customer base despite the additional costs," said Grobler.

- Fin24.com