Capital Markets

Bank cheque payments recover from Covid shocks

cheque
BDgeneric_logo

Summary

  • CBK data show deals amounting to Sh1.23 trillion were settled via cheques between January-June 2021 compared with nearly Sh1.40 trillion a year earlier.
  • Despite Sh94.41 billion year-on-year growth, cheque payments in the half-year period were 4.92 percent thinner than nearly Sh1.3 trillion cleared in 2019 and the lowest since 2014.

Bank payments made through cheques for the first half of the year rose 8.29 percent, rebounding from a Covid-induced double-digit drop in a similar period last year, which saw traders and households cut visits to banking halls.

The latest Central Bank of Kenya (CBK) data show deals amounting to Sh1.23 trillion were settled via cheques between January-June 2021 compared with nearly Sh1.40 trillion a year earlier, signalling improved circulation of cash in the economy.

Despite Sh94.41 billion year-on-year growth, cheque payments in the half-year period were 4.92 percent thinner than nearly Sh1.3 trillion cleared in 2019 and the lowest since 2014.

Transactions in cheques dropped last year after public health and financial services authorities encouraged businesses and homes to use digital payment platforms such as PesaLink — an interbank mobile payment channel for payments of less than Sh1 million — and mobile money platforms which allow deals of up to Sh300,000 a day deals.

Cheque payments, which require clients to visit banking halls to fill and sign off forms and restricted to deals below Sh1 million per transaction, were largely hurt by social distancing rules amid depressed economic activity.

“A year ago when the ministry announced stay-at-home measures, we saw people deliberately start to move away from the branches,” said Standard Chartered Bank Kenya chief executive Kariuki Ngari in an interview in June.

“We have seen, especially in Nairobi, some of our branches had over 90 percent reduction in footfall.”

Payment deals from Sh1 million are strictly settled through the Kenya Electronic Payments and Settlement System and Real-Time Gross Payment System where cash reflect within four hours of getting instructions under guidelines refreshed in October 2009.

The real-time transaction-by-transaction payments enable the CBK to scrutinise and flag suspicious or unusual transactions that may be linked to money laundering or financing of terrorism.

The CBK data show Sh17.27 trillion were settled through the Kenya Electronic Payments and Settlement System and Real-Time Gross Payment System in the January-June 2021 period, a growth of 11.13 percent over Sh15.54 trillion a year earlier.

Some shrewd traders can, however, avoid the regulatory scrutiny by splitting up bulky payments using other payment channels such as cheques, which take up to two days to be cleared, or through cash withdrawals in banking halls.

Financial institutions are required to report to suspect deals to the Financial Reporting Centre — the agency launched in April 2012 and mandated to combat money laundering and financing of terrorism.