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African Banking: the Paper-Free Future of Checks

  • Joana Mantey

This is Part Three of a five-part series on Modernizing African Banking
Continue to Parts: 1 / 2 / 3 / 4 / 5

A new software package is promising to help West African banks process checks faster, more cheaply, and more securely.

The package works on the so-called “truncation model,” which is already being used to speed up secure banking elsewhere in the world.

Marius Krige, who has 20 years of experience in the IT and financial sectors, explained that check truncation “means paper at the point of entry,” or when the check first reaches a bank, it is scanned. The scanned image, he said, is kept on file, “so that chances for fraud and tampering of paper-based instruments can be nullified.”

Krige, the regional executive of Aperta Limited, a South African company focused on improving payment processing for the commercial, public, banking and financial sectors, says the truncation initiative will be especially helpful in improving cross-border transactions in West Africa.

Within ECOWAS, a West African regional trade grouping, member countries have a number of different currencies. The group says it aims to switch to a single currency, but it is unclear when – or if – that goal will be attained.

In the meantime, Krige said the multiple currencies poses challenges to the region’s payment system.

“At the moment, a lot of payment is made in local currency,” he said.

That means that in order to be deposited in another country, the payment needs to be converted into another currency. But that process is expensive, Krige said, both because there are fees involved, and because the money loses value in the exchange.

In addition, under the old system, the physical piece of paper the check was written on had to be transported through a clearing house to a bank in another country.

But under the truncation model, payments made by a Ghanaian supplier, for example, can be sent to a bank and a clearing house in a single email – which saves both time and money. And instead of exchange rates being determined between individual banks, they can be determined at a specified time against a major currency.

The model is currently being used in South and East Africa. Krige says about 12 commercial banks in Ghana have also adopted the system.