Innovation Markets

E-payment: Cheque transactions plunge to 5trn in 2018

.Lagos accounts for 55% of issuance

From an all-time high of 17.8 trillion recorded in 2009, value of cheque transactions in Nigeria has been on steady yearly decline to hit an all-time low of N5 trillion in 2018. The volume of check transactions also dropped to 9 million from 10.8 million in 2017, according to statistics released by the Nigeria Interbank Settlement System (NIBSS).

The decline is attributed to the growing preference for electronic payment channels, which are considered faster than cheque. For instance, in 2018, transactions over Point of Sales terminals, which is one of the several e-payment channels, increased by 64 per cent last year with a value of N2.3 trillion.

Reviewing the payment system in the country for 2018, NIBSS noted that the decline in cheque transactions has become a global phenomenon. “Globally,  as  the  market  share of  cheques decline in  the  wake of increased  adoption  of  contactless  and  real-time payments, a  duopoly may likely develop in the non-cash market  with cards and credit transfer (instant payments) dominating across most geographies. For instance, in the Asian-Pacific (APAC), China, South Korea and Australia recorded a 20 per cent drop in Cheque usage although India recorded a 10.1 per cent increase in usage due majorly to her government's demonetization policy”.

NIBSS added that in the US, cheque usage remains a government backed phenomenon as it contributed a whopping 73.5 per cent of global cheque volume. “In Nigeria, Cheque transactions have continued on a downward spiral from its peak volume of 15.3M in 2014 to 9M in 2018. This is a -10% CAGR over  the  five  year  period; with  a  growth rate  of -17 per cent  when compared to 2017. Although, the volume of cheque transaction is decreasing, it is fair to say that its use is still relevant, especially amongst larger value transactions, Bill Payments, and Payroll transactions” NIBSS said in the review.

A breakdown of the types of cheques issued in the year revealed that corporate cheques accounted for the 60.2 per cent of all cheques issued at 5.4 million, individual cheques stood at 2.1 million, representing 23.4 per cent of the total number, while Managers cheque constituted 12.3 per cent at 1.1 million. Bankers draft, dividend warrant and debit not stood at 0.2 million, 0.17 million and 0.007 million respectively.

Meanwhile, further analysis of the cheque data showed that 55 per cent of all the cheques issued in the country in 2018 were issued from Lagos, representing the largest concentration of check issuers in the country. The Federal Capital Territory, Abuja, followed distantly with 7 per cent of cheques issued. According to the NIBSS statistics, 6 per cent of the cheques were issued from Rivers State, 5 per cent from Oyo State and 3 per cent issued from Ogun State.

Since the introduction of the cashless policy by the Central Bank of Nigeria in 2011, electronic payment has continued to gain traction in the country thus reducing the usage of cheque. According to analysts, the huge growth in e-payment is due to a combination of factors such as increased adoption by SMEs, chain business owners etc; increased awareness as well by cardholders, who ask for the PoS from business owners when making payments; and improved dispute resolution process for failed transactions.

While cheque transactions are declining, transactions over the e-payment channels have consistently been on the rise. According to NIBSS’ third quarter 2018report, e-payment services recorded transactions worth N56.85 trillion from January to September, 2018. The report showed that most of the electronic transactions were done through NIBSS Instant Payment, NIP, Point of Sale, PoS, Automated Transfer Machines, ATMs, Mobile Money, Electronic Bills Payment (E-Bills) and Web payments.

A breakdown of the report showed that ATMs transactions grew from N4.61 trillion in 2017 to N4.76 trillion at the end of the third quarter of 2018. Also, the volume of transactions on ATMs under the period in review grew from 560.86 million in 2017, to 650.06 million in 2018. The report showed a rise of about N635 billion in the use of PoS machines to carry out payments by Nigerians.

 

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