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The Monetary Authority of Singapore (MAS) has announced that corporate cheques will be phased out by the end of 2025, although individuals will still be able to use cheques beyond that date.
Under new plans unveiled by the MAS, banks have been ordered to cease issuance of cheque books to all corporate clients in 2025, ahead of the year-end deadline.
Coinciding with the phase out of corporate cheques, the MAS hopes that a new electronic deferred payment (EDP) solution, which will also allow users to issue cashier’s orders, will be up and running.
The design of the EDP solution is currently being led by the Association of Banks in Singapore (ABS), which is working with Domestic Systemically Important Banks (D-SIBs) on the project.
The proposed EDP solution will make use of PayNow, Singapore’s instant payments system, to allow payers to identify payees when sending money via the EDP solution.
For individuals, the MAS said that cheques will remain a payment option beyond 2025, although banks will work towards switching customers from cheques to digital payments in the meantime.
Next year, the central bank will publish a consultation to set out the initiatives and a timeline to eliminate individual cheques and terminate the cheque truncation system (CTS).
Cheque charges incoming
From November 1 this year, the MAS has authorised banks to start charging fees for the processing of all Singapore dollar cheques.
The MAS said the introduction of charges is necessary due to the falling use but rising costs of processing cheques, which at present are covered entirely by banks.
From 2016 to 2022, annual cheque transaction volume declined from 61m to less than 19m, but during the same period, the cost of clearing a cheque quadrupled from S$0.10 to S$0.40 ($0.30).
“If cheque volumes fall by a further 70 percent by 2025 , the cost of clearing a cheque is projected to increase to between $2.00 and $6.00 by 2025,” said the MAS.
“Banks will no longer be able to absorb these costs and will have to reflect the cost of cheque processing in their charges to their customers.”
A consensus decision
The decision to phase out cheques was taken following a consultation that was published in November last year by the MAS and the Payments Council.
The Payments Council is composed of major providers and user groups of payment services in Singapore, and is chaired by the MAS.
The consultation, which proposed a roadmap to terminate the CTS and transit all users out of usage of cheques, received “significant support” from both financial and non-financial service firms.
Both the MAS and ABS will now encourage all cheque users to switch to other payment methods as the industry prepares to retire the CTS.
This is in line with Singapore's "Smart Nation" vision, one of the aims of which is to provide access to fast, simple and secure payments to all citizens.
The global decline of cheques
In June this year, Australia also laid down a timetable for the phasing out of cheques.
Under its latest Strategic Plan, Australia’s Treasury confirmed that it aims to achieve a “full wind-down” of cheque use by 2030.
Ahead of 2030, the Treasury will work to remove legislative and other barriers that have allowed cheques to become “entrenched” in Australia’s economy, and will aim to phase out cheque use in government by 2028.
Anna Bligh, CEO of the Australian Banking Association (ABA), welcomed the move, noting that in the last ten years cheque use has fallen 90 percent in Australia.
According to a VIXIO analysis, the last “remnants of relevance” for cheques are in the US, France and India. In 2020, these three countries accounted for four in every five cheques written.
The US accounted for more than two thirds of all cheques globally (69 percent), followed by France (7 percent) and India (4 percent). However, even in these markets there has been a significant decline.
In 2021, US consumers and businesses wrote around 10bn cheques, according to the Bank for International Settlements, a 33 percent decline since 2017.
In France and India during the same period, cheques declined 43 percent and 38 percent respectively.
In the UK, cheques have gone from being ubiquitous to extremely rare. In 1990, more than 4bn cheques were written by consumers and businesses in the UK, but in 2022 this had fallen to just 136m, and volumes continue to slide.
