Monday 14 / October / 2024
Muscat: The increasing adoption of electronic alternative payments has resulted in a significant decline in the use of cheques for payments since 2018, according to a new report.
“The number of cheque payments has decreased notably, going from approximately 4.7 million in 2018 to 3.7 million in 2023,” according to the Financial Stability Report (FSR) 2024, by the Central Bank of Oman (CBO).
This decrease clearly indicates the ongoing transition from paper-based payments to digital payment methods. “As a result, the volume of unpaid cheques within the system also declined from 387,000 in 2022 to 362,000 in 2023. This decrease represents a 9.8 percent reduction in the proportion of unpaid cheques to the total number of cheques presented in the system during 2023,” the FSR report revealed.
The report further elaborated that the majority of unpaid cheques, in terms of volume, were returned due to financial reasons rather than technical reasons. “Specifically, ‘Insufficient Funds’ remains the leading cause behind unpaid cheques, with a total volume of 291,444, accounting for 80.5 percent of all unpaid cheques. This is followed by ‘Account Closed / Frozen/ Transferred’, totalling 31,614 cheques (8.73 percent).
It’s important to note that a bounced cheque or having an unpaid cheque is considered a serious offence in Oman and may result in legal consequences, including fines and imprisonment. In some countries, partial fulfillment of cheques has been introduced as an alternative measure. Under this system, if the full amount specified on the cheque is not available in the writer’s account, banks are required to cash a partial amount equal to the available funds, unless the cheque bearer rejects the option for partial payment.
The report said that, “The CBO is working jointly with other government entities on introducing regulations to allow for the partial fulfillment of cheques. This is done to provide more flexibility for both businesses and individuals when managing their cash flow and account balances. Previously, cheques in Oman had to be paid in full upon presentment. The new rules will permit banks to accept and process cheques even if the payer’s account does not have sufficient funds to cover the full amount.
The bank will then debit the available balance from the account and the payee can choose whether to accept the partial payment or reject the cheque entirely.
CBO aims that the partial fulfillment option will reduce the number of cheque defaults and provide a more efficient payment system overall.
The FSR further said that the number of transactions handled within the Payment and Settlement Systems (PSS) has shown a steady increase, with a growth rate of 22.5 percent in 2023. During the year, the system processed a total of 355.9 million transactions, compared to 275.9 million transactions in 2022. Likewise, the total value of transactions conducted through the system experienced a 13.9 percent growth from the previous year. In 2023, the aggregate value reached OMR240.1 billion, compared to RO 206.6 billion in the previous year.
During 2023, there was a slight decline of 6.36 percent in the number of bank transfers made through the RTGS system. However, the value of these transfers experienced a notable increase of 14.5 percent compared to 2022, rising from OMR179.3 billion to OMR209.9 billion. On average, the daily value of these transfers amounted to approximately OMR575 million.
E-payments
The total volume of retail transactions has experienced a significant exponential growth of 22.5 percent compared to the previous year. In 2023, the number of transactions reached 355.2 million, up from 274.4 million in 2022. Additionally, the value of transactions conducted through retail systems increased by 9.70 percent, reaching a total value of OMR30.2 billion.
The significant growth in the volume of transactions processed through retail payment systems since 2021 can be attributed to several factors. A key driver behind this growth is the wider adoption of E-payment methods and the increasing shift away from cash usage. As people increasingly embrace digital transactions, E-payment services have become more prevalent, especially during the pandemic when safer and faster online payments were in high demand.
The progress made in terms of the reach and utilisation of these payment systems has been remarkable. Notably, the volume and value of transactions conducted through the Automated Clearing House (ACH) have seen an 18 percent increase.
Similarly, the usage of OmanNet, another electronic payment system, has risen by nearly 30 percent in terms of transactions and around 10 percent in terms of value.
In contrast, traditional paper-based payment methods like cheques have experienced a decline below the 5-year average, indicating a shift towards digital alternatives. This decline reflects the ongoing transition from paper-based transactions to more efficient and convenient digital payment options.
Furthermore, mobile payment usage has witnessed a substantial surge, with transactions increasing by 726 percent and value increasing by 507 percent in 2023. The convenience and accessibility offered by mobile payment solutions have contributed to this remarkable growth.
Overall, the expansion of e-payment services, the decline in cheque usage, and the significant increase in mobile payment transactions and values have collectively driven the exponential growth in the volume of transactions processed through retail payment systems during the last three years. In 2023, there was a significant increase of 30.2 percent in the volume of e-Payment transactions, totaling 328.3 million transactions. This growth can primarily be attributed to point-of-sale (POS) transactions, which experienced a substantial increase of 40.5 percent.
Additionally, transactions conducted through e-commerce platforms saw a growth of 17.2 percent. On the other hand, ATM transaction volume declined by 2.2 percent.
This can be attributed to avoiding unnecessary cash usage as more people opt for cashless payment methods.
