As we all know, cheques when compared to electronic payments are less efficient for various reasons – it has high printing and processing costs, requires manual interventions in the form of encoding and keying in cheque details, poses significant reconciliation challenges in terms of payables and receivables, needs to be preserved for longer period as per legal and regulatory requirements, has longer clearing and processing cycle etc., in addition to having inherent liquidity and credit risks.
In contrast, electronic payments eliminate these inefficiencies and provide a faster, efficient, secured mode of transactions at a fraction of the cost. Electronic payments, where they are “credit-push” based imply that credit, liquidity and systemic risks are substantially reduced, and there is also adequate certainty on funds availability to the beneficiary.