As electronic payments continue to become more widespread, a payment mode from the past has been steadily declining.
While issuing a cheque used to be a common practice, cheque usage has fallen so much that banks will now start charging for the service from 1 Nov.
Source: Money Knack, www.moneyknack.com on Unsplash
As an indication of its declining popularity, annual cheque transaction volume has fallen by almost 70% since 2016.
In a media release on Friday (28 July), the Monetary Authority of Singapore (MAS) said seven local banks will start charging for Singapore-dollar (SGD) cheques from 1 Nov.
That applies to cheques issued by individuals as well as corporate entities.
These seven banks, described by MAS as Domestic Systematically Important Banks (D-SIBs), are:
Other banks in Singapore will start charging by 1 July 2024.
The charges for cheque issuance will vary depending on the bank, MAS said.
They will be implemented in phrases.
As for cheques denominated in United States dollars (USD), charges will also be implemented in phrases.
The respective banks will share details when they’re ready.
MAS cited steadily falling cheque usage as the reason for the new charges.
The annual cheque transaction volume has dropped by almost 70% since 2016, they said.
Seven years ago, the figure was 61 million, but it was less than 19 million in 2022.
At the same time, more corporates and individuals have been adopting e-payments.
Source: CardMapr.nl on Unsplash
Falling usage has affected the average cost of clearing a cheque, MAS said.
As processing cost is fixed, it means that the average has gone up four times between 2016 and 2021 — when it cost S$0.40.
While most banks have been subsidising this cost, this may become unsustainable in the near future.
Specifically, it might cost between S$2 and S$6 to process one cheque by 2025, if cheque volumes decline a further 70% by then.
That means banks will no longer be able to absorb these costs and must pass them on to customers.
As part of the move away from cheques, banks will also stop issuing new cheque books to corporate clients in 2025.
Banks will work towards building an e-payment system, based on existing platforms like PayNow and GIRO, so cheques won’t be needed by corporates.
Instead, they would be able to make a deferred payment or issue a cashier’s order. This system will be ready by 2025, MAS said.
Individual cheque users, however, will still be able to use cheques after 2025 “for a period”, MAS revealed, adding,
This will provide the remaining individual users with a longer runway to switch to alternative payment methods.
As the financial industry prepares to retire the cheque truncation system, the authorities are encouraging all cheque users to switch to other payment methods.
Thus, a series of initiatives will be launched to help cheque users transition to e-payments.
This includes initiatives to assist the remaining individuals who’re still using cheques.
For example, banks will reach out to customers who have yet to convert to e-payments to allay their concerns, MAS said.
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Featured image adapted from Money Knack, www.moneyknack.com on Unsplash.
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