SINGAPORE: Banks in Singapore will start charging customers for issuing Singapore dollar cheques by Nov 1, the Monetary Authority of Singapore (MAS) and the Association of Banks in Singapore (ABS) announced on Friday (Jul 28).
At least seven banks – DBS, UOB, OCBC, Citibank, HSBC, Maybank, and Standard Chartered – will start imposing fees on cheque issuers, both corporates and individuals, by then.
Other banks will do so by July next year.
There will also be separate charges for depositors – both corporates and individuals – of Singdollar-denominated cheques. This will be implemented in phases and charges will vary among banks.
It was also announced on Friday that Singapore will eliminate corporate cheques by end-2025.
Individuals will still be able to use cheques "for a period" after 2025, MAS and ABS said in a joint media release, without specifying a date.
Cheque usage in Singapore has been falling steadily, while there has been growing adoption of e-payments by corporates and individuals.
Annual cheque transaction volume fell by almost 70 per cent from 2016 to 2022, from 61 million to 19 million.
Banks incur a “fixed cost” when it comes to processing of cheques. These costs include cheque clearing costs and other bank operating costs, such as the collection and handling of cheques, data capture, as well as imaging and signature verification.
An online image-based cheque clearing system, called the Cheque Truncation System, has been in use by banks in Singapore since 2003. With the system, cheques are scanned when deposited and their electronic images, instead of the physical cheques, are transmitted throughout the clearing cycle.
With falling volumes, the average cost of clearing a cheque has quadrupled since 2016 to 40 cents in 2021.
This is set to increase to between S$2 and S$6 by 2025, if cheque volumes fall by another 70 per cent by then, said MAS and ABS.
Most banks have been subsidising the cost of cheque processing. But given the expected increase, banks will no longer be able to absorb these cheque processing costs and will have to reflect the cost of processing in their charges to their customers, said MAS and ABS.
MAS launched a public consultation in November last year, detailing several initiatives to eliminate corporate cheques by 2025.
These proposals received significant support, as well as feedback from both the financial services sector and business communities, said MAS and ABS.
They will work on several measures to facilitate the transition to zero corporate cheques by end-2025.
One such measure is to build an electronic deferred payment solution (EDP) to allow users to make a deferred payment or issue a cashiers’ order, without the need for cheques.
The EDP solution will leverage existing payment solutions, such as PayNow and GIRO, and be ready by 2025. Banks will stop issuing new cheque books to all corporates from 2025.
Individual cheque users will still be able to use cheques for “a period” beyond 2025, the press release said without providing details.
“This will provide the remaining individual users with a longer runway to switch to alternative payment methods,” said MAS and ABS.
“In the meantime, banks will be reaching out to customers who have yet to convert to digital payments to allay their concerns.”
MAS said it will further study the use of cheques by individuals and develop “appropriate initiatives” to assist remaining users in their transition to alternative payment methods, such as PayNow, FAST or GIRO.
It will conduct a second public consultation next year to set out these initiatives and a timeline for the elimination of individual cheques and the termination of the Cheque Truncation System.
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At least seven banks – DBS, UOB, OCBC, Citibank, HSBC, Maybank, and Standard Chartered – will start imposing fees on cheque issuers, both corporates and individuals, by then.
Other banks will do so by July next year.
There will also be separate charges for depositors – both corporates and individuals – of Singdollar-denominated cheques. This will be implemented in phases and charges will vary among banks.
It was also announced on Friday that Singapore will eliminate corporate cheques by end-2025.
Individuals will still be able to use cheques "for a period" after 2025, MAS and ABS said in a joint media release, without specifying a date.
FALLING CHEQUE USAGE
Cheque usage in Singapore has been falling steadily, while there has been growing adoption of e-payments by corporates and individuals.
Annual cheque transaction volume fell by almost 70 per cent from 2016 to 2022, from 61 million to 19 million.
Banks incur a “fixed cost” when it comes to processing of cheques. These costs include cheque clearing costs and other bank operating costs, such as the collection and handling of cheques, data capture, as well as imaging and signature verification.
An online image-based cheque clearing system, called the Cheque Truncation System, has been in use by banks in Singapore since 2003. With the system, cheques are scanned when deposited and their electronic images, instead of the physical cheques, are transmitted throughout the clearing cycle.
With falling volumes, the average cost of clearing a cheque has quadrupled since 2016 to 40 cents in 2021.
This is set to increase to between S$2 and S$6 by 2025, if cheque volumes fall by another 70 per cent by then, said MAS and ABS.
Most banks have been subsidising the cost of cheque processing. But given the expected increase, banks will no longer be able to absorb these cheque processing costs and will have to reflect the cost of processing in their charges to their customers, said MAS and ABS.
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MAS launched a public consultation in November last year, detailing several initiatives to eliminate corporate cheques by 2025.
These proposals received significant support, as well as feedback from both the financial services sector and business communities, said MAS and ABS.
They will work on several measures to facilitate the transition to zero corporate cheques by end-2025.
One such measure is to build an electronic deferred payment solution (EDP) to allow users to make a deferred payment or issue a cashiers’ order, without the need for cheques.
The EDP solution will leverage existing payment solutions, such as PayNow and GIRO, and be ready by 2025. Banks will stop issuing new cheque books to all corporates from 2025.
INDIVIDUAL CHEQUES
Individual cheque users will still be able to use cheques for “a period” beyond 2025, the press release said without providing details.
“This will provide the remaining individual users with a longer runway to switch to alternative payment methods,” said MAS and ABS.
“In the meantime, banks will be reaching out to customers who have yet to convert to digital payments to allay their concerns.”
MAS said it will further study the use of cheques by individuals and develop “appropriate initiatives” to assist remaining users in their transition to alternative payment methods, such as PayNow, FAST or GIRO.
It will conduct a second public consultation next year to set out these initiatives and a timeline for the elimination of individual cheques and the termination of the Cheque Truncation System.
Continue reading...