Cheque payments drop amid growth in digital transactions  

Bank of Uganda says cheque payments have been reducing due to growth in electronic payment systems. Photo | File 

What you need to know:

The drop in cheque payments could have been precipitated by an increase in electronic-related transactions, according to Bank of Uganda 

Cheque payments dropped by 6.7 percent in the period ended June, according to Bank of Uganda. 

The drop came amid growth in electronic payments, which has seen a number of Ugandans move away from cheque and cash-based payments. 

During the period, according to Bank of Uganda, cheque payments dropped from Shs7 trillion in June 2021 to 6.5 trillion, while payments through electronic fund transfers grew by 13.73 percent, signalling a shift to new technology-based payments.  

The drop came on the back of a revision in the value of cheque limits, which in January, were lowered from Shs20m to Shs10m while dollar cheques were lowered from $5,500 to $2,750. 

Euro cheques were lowered from €4,500 to €2,250, while those in British pounds and Kenyan shillings were lowered from £4,400 to £2,200 and Ksh600,000 to Ksh300,000, respectively. 

Speaking during the signing of a memorandum of understanding between Uganda Bankers Association and Non-Bank Payment Service Providers in Kampala last month, Dr Michael Atingi-Ego, the Bank of Uganda deputy governor, said that whereas the reduction in cheque payments was in sync with the new interbank cheque value limits, other electronic payments systems had registered growth thus eating into cheque payments. .

For instance, during the period ended June, he said, payments through electronic funds transferes had grown by 13.73 percent from Shs41.98 trillion in June 2021 to Shs47.75 trillion. 

Other electronic payment systems, Dr Atingi-Ego noted, had also registered growth with payments through the Uganda National Interbank Settlement System increasing by 10.7 percent from 501.6 trillion in the 12 months to June 2021 to 555.5 trillion.  

During the period, he said, electronic money transaction values significantly increased, growing by 37.6 percent from Shs113.38 trillion to Shs156 trillion. 

However, Bank of Uganda noted that low value electronic transactions, which average at Shs31,000 and form 92.6 percent of payment volumes, dominate electronic money transfers. 

This, Dr Atingi-Ego said, indicates that digital payments have the potential to transform the economy, urging stakeholders to promote e-payments as support for ongoing efforts to implement the e-payments strategy. 

He also urged stakeholders to participate in the formulation of the second phase of national financial inclusion strategy launched under the 2022/27 strategic plan to enhance social economic transformation.  

Bank of Uganda has been working under the recently enacted National Payment Systems Act to reduce cash-based payments. 

In 2018, the Central Bank had indicated Uganda would have achieved a cashless economy by 2021 but later conceded this would take more time given a number of challenges. 

However, there has been an enhanced uptake in cashless payments driven by Covid-19 related disruptions. 

Policy interventions
Bank of Uganda has indicated that it is working on a number of policy interventions, among which include implementation of the National

Switch for which a memorandum of understanding between the Central Bank and Uganda Communications Commission has been signed, that will enhance digital financial services. 

It is also working with the ministries of Finance and Justice to expedite the National Payment System Consumer Protection Regulations and amendments to the National Payment System minimum capital requirements to empower and strengthen consumer rights and address  rampant digital fraud as well as create more room for entry of smaller innovators who may not have Shs250m, which is the lowest capital requirement for a licence,” he said.


 

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