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The Central Bank of Nigeria (CBN) had earlier introduced the new cheque standards across all banks in line with it’s commitment to ensure an enabling environment for efficient processing of cheques and other paper-based payment instruments through complete application of new and already adopted technologies as captured in one of its recently released report titled; “Monetary, Credit, foreign and exchange policy guidelines for fiscal years 2020/2021’’.

Consequently, deposit money banks (DMBs) are set to commence implementation of the approved new cheque standard with distinct new features like Quick Response (QR) Code for faster verification of cheque details, expiry date of printed cheque booklet, clear zone at the back of the cheque and a new digit on the Magnetic Ink Character Recognition code line, from January 1, 2021.

While the Central Bank says it will embark on full enforcement of the new cheque standards on April 1, 2021, commercial banks, in their recent notification emails, have given their customers December 30 and 31 as the deadlines for accepting the old cheques.

The new and old cheque standards have been running concurrently since the introduction of the new cheque standards in September 2019. It’s expected that thereafter, only cheques that conform with the new standards would be allowed in the clearing system.

While the new standards are justified by the new digit on the Magnetic Ink Character Recognition, (MICR) code line and expiry dates, which are expected to enhance its security and reduce fraud, the consistently declining volume of cheque transactions raises a fundamental question about the priority and relevance of the new cheque standards.

From January to October this year, the Nigeria Inter-Bank Settlement System (NIBSS) processed a total of 3.94 million cheques. The volume is equivalent to 60 per cent of the 6.56 million it treated in the same period last year.

The reduction in the volume of cheque transactions this year is understandable. Most of the decisions taken this year were largely influenced by the COVID-19 outbreak, which, among other cautions, called for a reduction in physical contacts. So, it suffices to say that most businesses would opt for transfer rather than the signing of cheques. But the new normal has only reinforced a growing new payment culture.

For instance, a monthly average of 900,000 cheques was cleared in 2017. That decelerated to 751,000 in 2018 and down to 651,000 last year. This year’s monthly average stood at 394,000 as of October, which is a mere 44 per cent of the volume recorded less than five years ago.

The number, indeed, dropped to an all-time low in April when it fell to 14,480, reflecting the agonizing impacts of COVID-19 on business activities, including payments.

As the cheque-signing ritual continues to lose its traditional hold, the value paid out through the mode is also shrinking despite an increase in business activities. Between 2016 and this year, new payment modes have almost halved the value of money that exchanges hands through the business settlement process yearly.

The payment system, like other aspects of business, is going digital, whose volume and value are disproportionately larger than cheque transactions. For instance, the total 810.8 billion cheque payments made in Q3 2020 was only 0.25 per cent of the N319.995 trillion that changed hands electronically in 2.8 billion transactions in the same period.

The changing payment process is global. And it is incredibly faster than earlier projected. Reports suggest that the number of people with a preference for electronic payments will increase in multiple terms in the post-COVID-19 era. Nigeria, compared to Kenya and a few other African countries, is in a catch-up race in electronic payment.

Yet, the mode has trumped the traditional payment systems, putting intense regulatory pressure on the CBN and other supervisory institutions. The innovative payment has birthed an entirely new industry, which the CBN seeks to regulate for a “seamless growth” and secured transactions.

Experts say the emerging culture breeds a generation of customers who do not have the benefit of seeing cheques or withdrawal booklets – which are but relics of the ancient banking system.

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