1. Why has PASA decided to reduce the Cheque limit?

The primary reason for reducing Cheques is to address risks within the Cheques
payment system. There is still a significant amount of fraud committed using
Cheques. The limit decrease is a concerted industry effort to address fraud. There
are many different electronic alternatives (see point 5 below). These alternatives are
also more efficient for the payment system. The fraud losses experienced for values
above R500 000 are disproportionately high when compared to those below that
level.

2. What is an item limit?

An item limit is the maximum value for which a payment can be made using a
specific payment instrument. An example of an item limit is the R500 000 debit card
item limit. This means that you can swipe your card to make a payment for values up
to R500 000. This is obviously not the same as the limit imposed by a particular
bank, which could be significantly lower. Each payment system has its own limit, the
highest being EFT credits, which is R5m. Values higher than this must be paid
directly using the South African Reserve Banks (SARB) SAMOS system- which is
unlimited.

3. What will the new limit be and by when will this limit apply?
The current item limit for Cheques is R5 m and will be reduced to R500 000. This
means that Cheques above this value will no longer be accepted and processed. The
limit will come into effect from the 16 July 2012.

4. Who will this impact?

The reduced item limit will impact those customers that make payments over R500
00 using Cheques. However, the number of customers impacted is very low.
Cheques above R500 000 makes up only 0.7% of the total Cheques issued, on
average per month over the last 2 years. This equates to 24 000 Cheques issued on
average per month.

5. What are the alternatives for the impacted customers?

There are a number of familiar electronic alternatives. These include:
EFT Credit payments these are internet payments, mobile payments, and
payments via telephone banking. The limit for this is R5 m.
Real Time Clearing (RTC) this transaction is processed within 60s across
banks. The channels typically available for this payment are internet and mobile
banking. The item limit is also R5m for intraday payments and reduces to
R250 000 for payments after 21h00.
Card payments - such as debit card and credit card payments. The limit is
R500 000 for debit cards and R5m for credit card payments.
Electronic based solutions through Real Time Line (RTL). These are electronic
solutions that banks offer to corporates with a direct electronic interface to the
banks systems for larger value payments and are usually relatively more costly.
The RTL provides direct access to the SARBs SAMOS system, for which there
are no item limits.

6. How secure are these electronic solutions?

 Electronic payments are more secure. With most electronic payments customers are
required to log on with their passwords and/or PINs. There is also two factor
authentication. Simply this means that above your usual log on, a one-time
password/PIN is sent by your bank to you either via SMS or email.

7. How significant is fraud?

Fraud is a major concern and over the last year Cheque fraud is just over R50 m per
annum. Although Cheque volumes over R500 000 is less than 0.7%, the total annual
fraud value for Cheques over R500k is R22.4m, accounting for more than 40% of
Cheque fraud.

8. How does fraud actually occur?

Cheques are fabricated, cloned, stolen, altered and then deposited mainly into
accounts opened for fraudulent activity.

9. Is PASA considering a strategy to move away from Cheques?

Cheques have been declining year on year by 24% on average. This is due to the
increase in the number of alternatives customers have. Customers typically migrate
to more convenient, less risky and cheaper alternatives. PASA is in the process of
reviewing the Cheques strategy. However an explicit strategy is still in the process of
being considered and further announcements can be expected later in the new year.

10. Who/what is PASA?

PASA is the association responsible for managing certain payment systems in South
Africa. PASA is recognised by the South African Reserve Bank (SARB), in terms of
the National Payment System Act of 1998, as having responsibility to organise,
manage and regulate the participation of its members in the payment system.

11. Does the SARB support this decision?

Yes, the SARB supports this decision, as it aligns with risk reduction and efficiency
principles.