The National Payments Council (NPC) chaired by the Acting Governor of the Bank of Papua New Guinea (BPNG), recently announced that the use of private sector cheques will be discontinued by December 31, 2023.
The NPC is comprised of senior executives from BPNG, Financial Institutions, and the government. This article explores the implications and challenges this major shift presents for small and medium-sized enterprises (SMEs), primarily focusing on the transition to digital payment systems.
Key implications for SMEs are as follows:
Transition to Electronic Payments: With private sector cheques being discontinued by the end of 2023, SMEs need to adapt to electronic modes of payment. This could involve setting up mobile or internet banking capabilities if they haven’t done so already. It could also mean training employees in how to use these systems securely and efficiently.
Reduced Fraud Risk: The NPC indicates that cheques are seen as a higher risk for fraudulent use. By transitioning to digital payments, SMEs may be able to reduce the risk of fraud in their transactions. This can be particularly beneficial for SMEs as they often have less robust fraud protection systems compared to larger corporations.
Operational Efficiency: Electronic payments typically offer quicker processing times, which can help improve the cash flow and liquidity of SMEs. This is because businesses won’t have to wait for cheques to clear to access their funds.
Cost Savings: The move towards digital payments could result in cost savings for SMEs as the press release highlights lower cost of payments to customers and elimination of costs associated with physical cash handling and depositing cheques.
Financial Inclusion: The new strategy is aimed at fostering greater financial inclusion through digital payments. This could mean that SMEs might see greater participation and ease of transaction from demographics that traditionally have less access to banking and financial services.
However, this move also implies challenges that SMEs need to anticipate:
Digital Literacy: For some SMEs, particularly in remote areas or those less familiar with digital systems, transitioning to electronic payments could be a challenging task. It’s important that they access necessary training and support.
Infrastructure Requirements: Dependence on digital payments requires reliable internet connection, appropriate digital devices, and secure platforms. SMEs need to ensure they have the necessary infrastructure to support this transition.
Security Concerns: While digital payments can reduce certain types of fraud, they also open up new avenues for cyber fraud. SMEs will need to ensure that they have robust security measures in place to protect their transactions.
Overall, while this change represents a significant shift in how business is done, it aligns with global trends towards digital banking and cashless transactions. SMEs will need to prepare and adapt to make the most of this transition.
Des Yaninen is president of the PNG MSME Council and has been an outstpoken advocate for SME development in PNG for over a decade. He is CEO of Pacifund, a financial services firm that helps SMEs secure bank loans or investment funding. Contact him on email [email protected].
