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Singapore’s financial watchdog has expressed sympathy with those hit by its decision to eliminate corporate cheques, but suggests there is no going back.
“We recognise that some businesses and customers may have difficulties and challenges in moving away from cheque usage,” said Dawn Chew, an official at the Monetary Authority of Singapore (MAS).
Chew said that MAS is working with the banking industry to develop solutions for customers who are unable to adopt alternative payment methods.
“The proposals for these solutions and the timeline for the termination of the cheque truncation system will be published in a consultation paper next year,” she confirmed.
The new statement comes after the MAS announced on July 28 that all corporate cheques will be eliminated by the end of 2025.
While individuals will still be able to use cheques for a period after 2025, cheque usage in Singapore is falling steadily and the cost of processing each cheque has been rising.
To recover these cheque processing costs, the MAS has given the green light for banks to commence charging for Singapore dollar (SGD)-denominated cheques by November 1 this year.
This announcement prompted two letters criticising the proposal in a local news outlet, the Straits Times, with one titled “Don’t penalise bank customers for cheques” (August 11) and the other “Banks should work towards cutting cost of clearance system” (August 15).
“Banks generally have not been charging customers the cost of clearing cheques. However, this is no longer tenable with the rising cost of cheque clearing on the back of a sharp decline in the volume of cheques in recent years,” Chew said.
For example, cheque volumes in the city-state fell by almost 70 percent between 2016 and 2022, as payment users move towards digital payment channels.
Chew said that this shift away from cheques towards digital payments will continue as more financial institutions and businesses offer secure and simple payment solutions to their customers through PayNow, a funds transfer service, and public-private platform eGIRO.
Chew also said that larger retail banks will allow their customers to make deferred payments digitally by 2025.
“Cheque clearing expenses comprise variable costs of issuing and clearing cheques, and fixed costs to run the central cheque clearing infrastructure,” said Chew.
She explained that with falling cheque usage, the fixed costs are distributed among fewer cheque transactions. “Each cheque becomes more costly for banks to clear, and cheque clearing will increasingly be an inefficient use of industry capital and resources over time.
“Charging for cheque usage that more accurately reflects processing costs enables customers to make informed choices as to how they transfer funds,” she said.
In addition, cheque users have the option of transitioning to cheaper and more efficient means of fund transfers such as FAST and Inter-bank GIRO, as the industry prepares to retire the cheque truncation system in the future.
Singapore is not the first country to set out plans to abolish cheques.
New Zealand, Sweden and South Africa have all done so, and earlier this year, Australian finance minister Jim Chalmers suggested that his country would follow suit.
More than a decade ago, meanwhile, the UK set out plans to end the use of the cheques, but it u-turned after a backlash.
