* The use of cheques in Malawi has steadily declined over the years due to increased demand for technological modes of payments
* Regulatory statistics indicate that only about 2% of value and 0.04% of the volume of all retail payments are made through cheque payments
* As a result of this low usage, service providers are finding it costly to maintain the infrastructure and processes relating to cheque payments
By Duncan Mlanjira
In aligning with global trends of the decline in the use of bank cheques due to increased demand for technological modes of payments, among others, the Bankers Association of Malawi (BAM) in conjunction with the Reserve Bank of Malawi (RBM) plans to phase out cheque usage in the country by December 31, 2025.
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A joint public notice from BAM and RBM notifies that cheque payments are governed by the Bills of Exchange Act of 1964 and the Financial Services Act of 2016, “whose responsible authorities are in the process of amending the legal instruments and the definitive date for discontinuing cheque usage in the country will be announced upon completion of the process”.
“Nevertheless, it is imperative that as a nation, we begin transitioning to alternative payment systems to ensure the continued safety and stability of our national payments infrastructure,” says the joint public notice.
The two financial institutions takes cognizance that the use of cheques in Malawi has steadily declined over the years due to increased demand for technological modes of payments and — following a comprehensive review and engagements with key stakeholders as well as in consideration of regional developments in the payment industry — it justifies the decision for the cheque cessation.
According to BAM and RBM, the justification stems from cost and efficiency consideration amidst low usage — as “regulatory statistics indicate that only about 2% of value and 0.04% of the volume of all retail payments are made through cheque payments”.
“As a result of this low usage, service providers are finding it costly to maintain the infrastructure and processes relating to cheque payments. Thus, the cessation of cheques will save the economy the foreign currency usually associated with the maintenance or importation of clearing platforms, scanners, software, bandwidth and cheque base stocks.
“In addition, the cheque payment, clearing and settlement arrangements are synonymous with time-consuming process requiring frequent costly reviews and enhancements.”
The notice further says the comprehensive review also considered financial security, since “cheques as a payment instrument is highly vulnerable to fraud, forgery and counterfeiting — leading to financial losses on the service providers and consumers”.
“Thus, the discontinuance of cheques will enhance the reputation and integrity of the banking and payments industries in the country.”
Impact of technological advancements was also considered in the comprehensive review as in recent times, RBM has pioneered reforms in the country’s banking and payments landscape resulting in the emergence of innovative digital payment options — including mobile money and online banking services.
Technological mode of payment currently being used by Malawian businesses
“Overtime, these innovative payment options have proven to be relatively faster, convenient and easier to use.”
The BAM and RBM also considered financial inclusion for all, saying they expect the cheque discontinuance “to have a positive impact on the adoption and usage of electronic payment services, thereby enhancing financial inclusion of the hitherto underserved and rural-based segments of our population”.
The two institutions also say this initiative is part of “greening the payments landscape” as cheques have a high carbon footprint due to the paper manufacturing process and inks used — thus the cessation will, therefore, assist in promoting the green environment in Malawi.
It also complies with Malawi’s digital economy transformation agenda “which aims at promoting adoption and usage of digital technologies to drive economic growth and development”.
The period between now and December 31 gives BAM and RBM room “to prepare the public for this change during which BAM will undertake awareness activities and provide the public with sufficient guidance”.
“All commercial banks will be offering tailored support and customer education programmes to assist customers, particularly the few that may still be less familiar with digital platforms to ensure smooth transition.
“All banks will work towards improving quality of service delivery through digital payment platforms,” says the notice.
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Whilst waiting for the amendment of the Bills of Exchange Act of 1964 and the Financial Services Act of 2016 and in recognition of the declining usage trends and the operational inefficiencies associated with cheque payments, BAM and RBM says they have agreed to commence transitional processes to discontinue cheque usage.
Once completed, the process will help de-risk the payments landscape in Malawi by mitigating the vulnerabilities associated with platform/infrastructure that is no longer adequately being supported, or will soon cease to be supported by service providers.
“The initiative will also improve the speed, security, affordability and transparency of payment transactions in Malawi,” concludes the statement.
Majority of Malawian big business have followed the transition of to electronic cheques, which came to the fore during the CoVID-19 pandemic that was aimed at decongesting banking halls.
Globally by big economy countries already transitioned to e-cheques as well as southern African countries led by South Africa — also in recognition of the decline in paper cheque usage.
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On his column published in The Business Weekly & Review when the Bank of Botswana decided to follow suit of the path taken by South Africa and Namibia to discontinue use of cheques as a form of payment, which was fully executed by January 2024, digital transformation professional, Montwedi Bakwena opined that there are rising costs associated with processing paper cheques “as some of the systems supporting them are out of warranty and support, and issues around fraudulent transactions emanating from forgery and cheque kiting”.
“However, on the consumer side of things, there is a general sentiment of lack of trust with regard to use of digital platforms,” he said. “I believe it is also due to literacy levels and ease of use on some of these digital platforms that intimidate many.
“This has dampened the uptake of a lot of digitally-led payment methods. We also have to be mindful of the need to ensure the inclusivity of all the unbanked in all the interventions we conduct.
“Is your organisation digitally-ready to facilitate payments? What are your major impediments? What would you need to be ready?” wrote Bakwena, whose focus is on issues of customer experience strategy, digital operations integration, channel migration, and public-private partnerships.
The concern he raised might surface in Malawi as BAM and RBM rolls out the cessation process — thus the assurance that the public will be prepared for the change during which BAM will undertake awareness activities and provide the public with sufficient guidance.
