Declining demand has led the Bahrain-based Arab Financial Services (AFS) to suspend its travellers cheque operations. Another issuer of travellers cheques - the UK's Barclays Bank subsidiary Interpayment - is also pulling back from the Gulf, but as part of a wider corporate reorganisation.

AFS, the region's largest issuer of travellers cheques, estimates that the Middle East and North African market has more than halved since the late 1980s. Costs of cheque operations now exceed sales revenues, AFS says. Market analysts say wealthier clients are using other products. AFS has suffered from the collapse of several regional markets, including Iraq, Sudan and Libya. Low dollar interest rates and the high level of agent fees also affected business, AFS says. It adds that it will resume sales if market conditions improve.

In December, AFS was placed on the embargo list by the US Treasury Department's Office of Foreign Assets Control (OFAC). AFS' Visa card programme was resumed on 20 February. AFS plans to replace cheque revenue by expanding a range of cards and wholesale foreign currency dealing operations. It will launch Mastercard gold and silver cards in March. Cheque sales previously accounted for about a third of AFS business (MEED 8:10:93).

The Bahrain office of Thomas Cook estimates the market fell by about 10 per cent in 1993. It forecasts a continuing decline over the next five to 10 years. But while more customers turn from cheques to cards, others will move from cash to cheques, an executive says. 'There will always be a need for a pre-paid product.'

Interpayment is undertaking a slow withdrawal from its Gulf travellers cheque transactions as part of a global reordering of operations by Barclays' services and businesses division (SBD). This is now focusing on technology- based instruments and SBD says travellers cheques do not form part of its core operations.

Interpayment will not renew its contracts with agents in the Gulf but will help them to find other international partners. Cheques will still be offered to Barclays' clients through the domestic system. SBD says the aim is 'a steady winding down across the board'.

Interpayment is working with Visa to develop electronic travellers cheques, which could later be offered in the region.

Following the reduction of AFS and Interpayment services, the main travellers cheque suppliers in the region will be American Express, Citibank and Thomas Cook.