New system set to write off region’s cheque books

Saturday December 14 2019

The RTGS systems of regional central banks will be upgraded to offer safer, more convenient alternatives to cheques. FILE PHOTO | NMG


East African businesses doing cross-border transactions have less than two years to use their cheque books after which all bulk payments in the region will be done electronically.

The EAC-Payment and Settlement System Integration Project (EAC-PSSIP) is nearly complete, with work currently ongoing to upgrade the Real Time Gross Settlement (RTGS) systems of regional central banks.

According to the EAC Secretariat, the project’s implementing agency, national legislations, regulations and policies required to support the new payment and settlement system have been harmonised.

The project, which is funded by the African Development Bank (AfDB) through a grant of over $22.5 million, is expected to go live in 2021.

In an interview with The EastAfrican, EAC-PSSIP project manager at the EAC secretariat Teresia Ndivo said, “The implementation of the project is over 85 per cent complete, with the final disbursement in June 2021.”

She added that the project will strengthen the efficiency of cross-border fund transfers across EAC countries.


“Implementation of the system will facilitate the phasing out of cheques, decrease the use of cash and enable a smooth migration to electronic payments,” states AfDB in a project appraisal report dated July 23 this year.

The move is in line with global trends: Several European nations and Australia are working on modalities to phase out bank cheques.

So far the Bank of Uganda has completed the upgrade of its RTGS, a project that was also funded by AfDB in the fiscal year ended June 30, 2019.


In October, the EAC secretariat received a $7.38 million grant from the AfDB and the African Development Fund (ADF) to develop and harmonise the payment and settlement system in South Sudan with those of the other EAC member countries.

The funding was $2.92 million and $4.46 million from AfDB and ADF respectively.

The EAC-PISSP was designed in 2012 before South Sudan was admitted as a member of the EAC. South Sudan was admitted as a full member of the EAC on October 1, 2016.

The Kenya Bankers Association (KBA) said bank cheques are more prone to fraud.

“There are risks involved in payment by cheque, which can be eliminated by alternative payment channels that are safer, faster, convenient, easier and instantaneous. Payment by cheque needs to be worked on slowly and left to die a natural death by putting in place alternative payment infrastructure,” said Habil Olaka, the KBA chief executive.

“When you provide the market with alternatives then you will find it drifting away from cheques. There are also other measures that can be used to minimise the use of cheques such as value capping,” he added.


According to the AfDB, there are significant risks and costs associated with the use of cash and cheques, particularly for large payments.

AfDB also says that the EAC banking industry needs cost-effective ways to process payments, expand their customer base, and increase profitability.

The EAC-PSSIP project involves an automated transfer system (ATS) that incorporates both the RTGS and an automated clearing house (ACH) that supports the clearing and settlement of high-value and retail payments.

Through the RTGS module, high-value transfers, particularly interbank and those between banks and the Central Bank, including monetary policy operations, are settled in central bank money in real time, reducing liquidity and credit risks in the system.

The ACH module clears low-value (retail) payments in several clearing cycles during the day, and provides for settlement in the RTGS component.

The ATS system is expected to support e-government, as it will have the capability to handle large-value and low-value transactions from governments.


The East African Payment System (EAPS), yet another payment mode for EAC member countries that was launched in May 2014, continues to underperform largely due to the reluctance to transact in local currencies within the trading bloc.

Kenya and Uganda make up over 90 per cent of EAPS transactions. The EAPS allows citizens of member countries to make and receive payments in all regional currencies.

Globally, attempts by world economies to eliminate the use of cheques to be replaced by plastic money has achieved mixed results. Denmark officially stopped the use of cheques in 2017.

At their peak in the early 1980s, more than 600,000 annual cheques were written in Denmark, but they were replaced by the national debit card Dankort that was introduced in 1983.

In Ireland, cheque usage has continued to fall, with volumes dropping by 13.4 per cent year-on-year after the government launched its National Payments Plan in 2013 to reduce reliance on cash and cheques, and promote the use of innovative and secure online payments.

As part of that plan, from September 19, 2013, dubbed e-Day, all public sector bodies in Ireland no longer issued or accepted cheques in their business dealings.

In Australia, the cheque book is expected to disappear entirely by the end of this year after it was found that the number of customer cheques processed in the county each month had dropped from 45,900 in January 2012 to just 6,549 in October 2017.

Bessie Hassan, money expert at, said cheques had been experiencing a “slow death” in recent years.

“It’s possible that the slow death of cheques will be extended slightly longer, with some users holding out and numbers continuing to dwindle,” she said.

“However, once cheques become increasingly rare, we would expect businesses to stop accepting them completely.

“Generation Z, which covers all children currently in primary and secondary education, will likely grow up to not recognise a paper cheque at all.”