Cheque transactions will not be phased out just yet despite the global trends point to a rising preference for electronic payments.
According to the Central Bank of Kenya (CBK), it would not allow a total phase-out of paper-based instruments, such as cheques, because of the risks of excluding some clients.
Through its National Payment Strategy report for 2022/2025 released last week, CBK said it will review the value caps on paper cheques to protect some users locked out of electronic payment systems.
“The review of current value-capping will be considered in order to mitigate the risk of digital exclusion that may arise due to businesses and individuals who still rely on cheques as the only means of making payments,” CBK said.
The CBK said the value of cheque transactions stood at 22 per cent of GDP in 2021, down from 57 per cent or Sh1.8 trillion in 2010.
“Cheque volumes and values continue to fall relative to the size of the economy, as individuals and businesses make greater use of other electronic payment instruments such as Kepss and mobile money,” CBK stated.
Cheque payments are currently capped at Sh1 million per transaction to encourage a shift to electronic funds transfer platforms such as the Real Time Gross Settlement (RTGS) system, commonly known as the Kenya Electronic Payments and Settlement System (Kepss) in line with a policy to digitize the economy.
The state opted for value capping on cheques in 2005 following Kepss introduction.
Payment deals above Sh1 million are strictly settled through the Kepss and RTGS where cash reflects within four hours of getting instructions under guidelines refreshed in October 2009.
The real-time transaction-by-transaction payments enable the financial sector regulator to scrutinize and flag suspicious or unusual transactions that may be linked to money laundering or financing of terrorism.
The value of bank payments made through cheques has dipped by a whopping 35 percentage points over the last 10 years as preference shifted to digital payment platforms.
