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Singaporean Banks to start charging for cheques from November

Singaporean Banks to start charging for cheques from November
By Ritesh Singh

MAS to phase out corporate cheques by 2025, charges for SGD Cheques Start Nov 2023 due to a fall in their usage and consequent increase in the cost of processing single cheque.

  • Banks will start charging for SGD-denominated cheques from November 1, 2023.
  • Cheques usage plummeted over 6 years: 61M (2016) to under 19M (2023), down almost 70%
  • Charging for cheques aligns with MAS & ABS's drive to boost electronic payments in Singapore.

The Monetary Authority of Singapore recently announced that, from 1 November, banks in Singapore will start applying fees for Singapore dollar cheques, while individuals will be allowed to use cheques until a date beyond 2025.

In association with seven major lenders namely Citibank, DBS, HSBC, Maybank, OCBC Bank, Standard Chartered Bank and UOB, the consortium of banks in Singapore aims to develop an electronic delayed payment solution. Other banks will also have to follow suit and implement this solution by July 1, 2024.

It is important to note that the charges will apply to non-SGD denominated cheques including local USD denominated cheques for both individuals and companies.

 

Over the past six years, the use of cheques has declined sharply, from 61 million in 2016 to less than 19 million in 2023, down nearly 70%.

The average cost of clearing a cheque has quadrupled since 2016, reaching 40 cents in 2021. If this decline continues, the estimated cost is expected to rise to $6 by 2025, despite the decline in cheque use.

The adoption of e-payments has led to a steady decline in cheque use among both corporate and retail customers of Singapore's largest lender, DBS. Over the past few years, there has been an annual decrease of 25% in cheque transactions, which can be attributed to the continued growth in electronic payment methods.

This trend is not surprising, as other financial institutions such as Citibank have observed similar patterns among their corporate customers. The shift towards e-payments and instant transfers has resulted in a significant 22% increase in digital transactions, while the use of cheques has seen a significant decline of 13%.

 

The move to charge for cheques is part of a wider effort by MAS&ABS to promote the use of electronic payments in Singapore.

Both the Monetary Authority of Singapore (MAS) and the Association of Banks in Singapore (ABS) share a common vision of adopting alternative e-payment methods such as PayNow, GIRO and e-wallets, with the ultimate goal of phasing out cheques and cashiers. shared. As part of their commitment, the MAS and ABS are actively working to develop appropriate initiatives to support and assist individual cheques users in transitioning to these alternative payment methods.

Banks levy fixed charges on processing of cheque requests which would include cheque clearing costs and other operational costs.

Contributions of Banks

OCBC, with its extensive network of 30 personal banking branches, has taken the lead in launching the Digital Silver program. This program is specially designed to help individuals aged 60 years and above acquire the necessary knowledge about the fundamentals of digital banking and payment processes.

To support the digital literacy of the community, Infocomm Media Development Authority and DBS are collaborating from November 2022. Their joint effort aims to organize digital literacy workshops, targeting a remarkable target of reaching 100,000 Singaporeans and residents. Till date, around 16,000 people have actively participated in these enlightening workshops.

While these efforts are still in the process of implementation, individuals can access the upcoming Electronic Deferred Payments (EDP) solution, which is scheduled to launch by the end of 2025. This solution allows users to make deferred payments and issue cashier orders without any dependencies on traditional cheques. In addition, the EDP will integrate seamlessly with existing payment solutions such as PayNow and GIRO, providing users with even greater convenience.

 

As technology continues to evolve, digital assets could play a significant role in shaping the future of finance, commerce and ownership paradigms.     

In line with Singapore's Smart Nation vision, both the MAS (Monetary Authority of Singapore) and the ABS (Association of Banks in Singapore) are encouraging all cheque users to shift to alternative payment methods as they retire the CTS (Cheque Truncation System). This proactive approach aims to ensure that everyone in Singapore's digital landscape has access to fast, convenient and secure payment options.

These developments indicate a wider shift in the financial landscape towards digitalization and underline the growing preference for convenient and efficient electronic payment solutions over traditional paper-based methods such as cheques.