Dubai: The use of cheques in transactions is decreasing globally, including the UAE, and it won’t be too long before it becomes obsolete, experts told Gulf News.
In a tech-savvy society like the UAE, where convenience is slowly replacing old habits, a number of companies and individuals now prefer electronic payments over cheques.
Cheques are becoming less and less popular because they carry a lot of risks and are more expensive than many other modes of payment to operate with.
The only major reason it is still being used in the corporate world is that there are no policies in place yet to fully remove them from the payments system. But this is being partly addressed in the UAE, with the Central Bank encouraging automated clearing houses to allow direct bill payments, direct deposit and automatic debit on cards.
“More and more bill payments [in other markets are now] made by using electronic means. The scenario is the same in the UAE. The cheque as a means of payment is less and less used by individual consumers. Even at corporate level, bank transfers are means of payment which are preferred versus the cheques,” said Eric Sridarane, head of operations at TransCash UAE.
“This is because the cheque offers no real guarantees for the entity or the persons who get paid by it. Risk of bounced cheque is always present. This risk is higher with private individuals,” he added.
Richard Sanders, ACI Worldwide principal solution consultant for Europe, Middle East and Africa, noted that while cash remains popular among the majority of consumers, cheque volumes have fallen significantly in markets like the UK.
“For the chequebook, the days may be numbered. A lot of retailers have already stopped taking cheques in some markets and for the Y and Z generations, they are simply a payment method people may not have access to, or have moved on from,” Sanders told Gulf News.
Alternative forms of payments
“It’s true that some companies still deal in cheques, but this is because policies have not been created to fully replace them yet. As mobile increases, along with alternative forms of payments, the use of cheques will become increasingly niche until they are no longer accepted,” he added.
What will most likely happen is that people in this part of the world will be increasingly using their mobile phones to make payments.
The UAE Government has recently unveiled its Smart City project, which will enable the public to use their mobile devices to transact with government offices.
Some markets might also implement a payment system similar to the United States’ Cheque 21, which allows banks to create a substitute or digital version of the original cheque to make the exchange of funds faster.
“The Middle East is an evolving market with fewer legacy banking systems than mainland Europe and, therefore, may embrace mobile quicker than others. A faster payments type system is also under review in some markets.
Banks’ processors no longer want paper and with electronic payments available, it is likely that we’ll see the number of cheques continue to drop in the Middle East market,” said Sanders.
“In a digital world, using paper suddenly seems incredibly antiquated and inefficient and is likely to be replaced by an image of the paper being processed,” he added.
Franceso Burelli, partner at Value Partners, said the functionality of cheques is being replaced by other payment products, although certain segments of the population, such as the elderly, charity organisations and small and medium enterprises, still rely on them.
“Cheques are decreasing globally. This is due to the fact that they are, first of all, more expensive than many other payments to operate with. This is the case for the banks that issue and cash in a cheque payment to the payer and the payee,” he said.
“Few countries like the US are addressing part of this issue by the imaging of cheques that are then processed electronically without the need to move them around between banks and processing centres, but this is not a common trend overall,” he added.
“Governments globally are phasing out cheques and paper-based payments in general. This is part of a global trend of efficiency improvement and cost reduction with governments worldwide, so I would expect this to be the case in the UAE, too,” said Burelli.