Banks services evolve: Cash, branches and cheques exit, but the fax machine hangs in there

Thursday December 13 2018

This week we saw a story about Namibia phasing out paper cheques. A leading bank, FNB, reminded its customers that they have untill June 2019 to exhaust their cheque leaves, after which they will no longer be acceptable in banking.

Yet cheque use is still prevalent in Kenya. About 1.5 million cheques worth sh200 billion are used every month. While the volume has been declining at a slow pace in recent years, the value has remained about the same, implying that cheques may be around for some time.

Meanwhile, Namibia went from about 2.2 million cheques written in 2012 to 1.1 million in 2016.

Cheques imply trust and credit-worthiness, and those from strangers are generally not readily accepted.

Cheques evolved through a truncation process back in 2011 that reduced the clearing period from about four to two working days by allowing banks to exchange images of cheques instead of actual cheques at the central clearinghouse. The amount one can pay using a single cheque has also been capped to sh1 million.

Cheques are used for tax purposes and for business payments. They are much cheaper than bank transfers, and allow companies to have better control and recording of their payments. With them, accountants can issue payments from their offices, without having to go to the bank, as is the case for bank transfers.


But cheques are fragile, prone to damage, errors, and sometimes fraud. You can’t make any edits on a cheque, and if you make a mistake, you have to write a new one.

A few years ago, the government made writing a bad cheque a serious crime, and last week a former senator was sent to jail over a matter that began when she, as a Member of Parliament, wrote a series of cheques when she did not have enough funds in an account.


During my banking career, I saw two types of cheques disappear. One was "traveller’s cheques", which you would purchase from a bank and carry on overseas where banks and merchants would accept them and give you local currency or goods. The other type was "banker's cheques", which were cheques issued by banks, and were intended to be just as good as cash, with more safety for things like payment of school fees. Parents could give their children bankers cheques to take with them when they reported to school. Those have now faded out and been replaced by mobile money, bank transfer and direct deposits, which in addition to paying fees, are now commonly used for paying rent.


Different bank services are on the brink of going away as seen in some unusual banking trends in Sweden. According to a New York Times article, half of the country’s 1,400 bank branches do not accept cash deposits. Banks are also removing ATMs, and 4,000 citizens have implanted microchips in their hands for payments. Sweden’s central bank is experimenting with digital currency to replace cash, and some studies have predicted that the country will stop using paper currency bills by 2025.


However, as many things change, one thing seems not to be going anywhere soon - the fax machine. Though you may not have seen or used a one in years, they are still used in the banking sector to confirm official instructions. Fax messages are used to confirm multi-million shilling transactions such as transfer of funds between banks or dealers, or the purchase of shares and bonds.

Kenya may be a world leader in mobile money transfers and mobile phone payments that power the informal economy, but it is still relatively steady in the use of other formal forms of payment and banking services.

Twitter: @bankelele