Banks in Singapore will start charging customers for issuing Singapore dollar cheques, the Monetary Authority of Singapore (MAS) and the Association of Banks in Singapore (ABS) announced on Friday (July 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 Nov 1.

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.

CNA has contacted the seven banks for more information, including when they will implement the charges.

It was 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 61 million in 2016 to 19 million in 2022.

Banks incur a fixed cost when it comes to processing cheques. These costs include cheque clearing costs and other 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, 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 (EDP) solution to allow users to make a deferred payment or issue a cashier’s 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 in 2025.

Doing so after the launch of the new payment solution will give corporates more time to transition away from cheques to the EDP solution and other alternative payment methods, said MAS in a separate release, detailing its responses to the public consultation paper.

INDIVIDUAL CHEQUE USERS

Individual cheque users will still be able to use cheques "for a period" beyond 2025, said MAS and ABS, 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 and 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. CAN

Source:
courtesy of TODAY

by TANG SEE KIT

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