Volume of payments by cheque drops to 10% ahead of deadline

The volume of payments using cheques has declined.  Payments by cheque in Uganda now constitute 10 per cent of the total payments as the general public shifts to electronic payments system. 

This development comes ahead of the implementation of the limit in the amount of money paid through the cheque system by the Bank of Uganda which begins on January 15, 2022. 

The deputy director payment system in Bank of Uganda, Mr Andrew Kawere, said recently during the NTV Link show that the implementation of cheque limit will be effected on January 15 2022 because the Central Bank is encouraging the e-payment system in the country. 

“Technology is faster, e-payment is the core electronic payments, and we have EFT, RTGS, and mobile money payment up to the quarter ending September 2021, payments/transaction by use of cheque has reduced to 10 percent,” he said.  

Mr Kawere said currently, there are 32.5 million accounts registered under mobile money payment system with 67 percent of it being active and payment stood Shs13 trillion in the quarter to September 2021. 

Rise of e-payments
“With different e-payments now in place, Ugandans are adopting the e-payment system,” he said. 
Modern technological developments have altered the way consumers interact with financial institutions, disrupting the payments system. The rise of the internet, digitisation, shifting consumer preferences and, in some but not all cases, regulatory reform, has accelerated the uptake and use of electronic payments (e-payments).

Once dominated by banks, the sector is witnessing both increasing competition from new entrants and the rise of e-payment methods that involve partnerships among different players, from telecom operators to express delivery companies and retail agents.

Globally, cheque use is steadily declining as electronic alternatives gain in popularity but it still remains a relevant payment system.    

Mr Kawere said Bank of Uganda (BoU) has lowered the limits on the value for cheque payments to promote e-payment.

“The new cheque limit effective January 15, 2022 is Shs20 million to Shs10 million, US Dollar $5,500 to $2,750, Euro 4,500  to Euro 2,250, GBP 4,400 to GBP 2,200  and the Kenyan Shs 600,000 to KES 300,000,”he said. 

Supporting fintech innovation
In the face of technological change, it has become increasingly common practice to enable innovation by creating regulatory safe zones. These “regulatory sandboxes” are controlled environments in which certain requirements are temporarily suspended or additional support measures are provided to allow experimentation with new products, most likely with a limited number of consumers. 

The approach enables technology firms and financial institutions to collaborate in a less regulated, closed marketplace, with the end result being more effective technology that benefits both business and consumers. It also enables regulators to better understand the benefits and impacts of a potential technology or payment method being applied more widely.

Mr Kawere said the Bank of Uganda is now allowing the innovators to test their product systems in the Central Bank and after which they can be licensed when their systems pass the test. He said there are 11 e-payment service providers that have been licensed by the Central Bank. 

E-payments rise       
Once dominated by banks, the sector is witnessing both increasing competition from new entrants and the rise of e-payment methods that involve partnerships among different players, from telecom operators to express delivery companies and retail agents.

Globally, cheque use is steadily declining as electronic alternatives gain in popularity but it still remains a relevant payment system.    

Mr Kawere said Bank of Uganda  has lowered the limits on the value for cheque payments to promote e-payment.

New entrants 
Once dominated by banks, the sector is witnessing both increasing competition from new entrants and the rise of e-payment methods that involve partnerships among different players, from telecom operators to express delivery companies and retail agents.

Globally, cheque use is steadily declining as electronic alternatives gain in popularity but it still remains a relevant payment system.