Reports in IOL on Thursday (Jan. 16) said the Payments Association of South Africa has lowered the maximum amount for which a check can be written to under $3,500 in an effort to encourage corporates to adopt electronic payment methods.
The shift will take effect in May of this year, with an eight-month grace period for checks that have already been written but not yet processed by the May 2020 deadline, reports noted.
In an interview with the publication, FNB Business Spokesperson Kenneth Matlhole said that corporates and government entities will be particularly impacted by the change, considering the heavy reliance on checks for many of these players, including schools, agriculture firms, motor industry businesses and others.
Matlhole emphasized the importance for businesses to prepare for the changes as soon as possible to avoid cash flow disruptions and to collaborate with financial service providers to implement an electronic payment solution. He also noted that for B2B payments, businesses must have conversations with their corporate buyers and suppliers to inform them of the change and reach a mutual agreement as to which payment method will be used instead of a paper check.
Matlhole added that businesses may want to offer discounts or other incentives to encourage their B2B suppliers to accept electronic payments.
“Given the reduction of check limits due to several issues, including fraud, it may not be viable for businesses to continue using checks,” Matlhole stated.
South Africa is not the only market in which businesses rely heavily on paper checks for B2B payments. However, recent research from the Association of Financial Professionals released last September found check usage in B2B transactions to be at an all-time low.