The Monetary Authority of Singapore (MAS) quotes the rising cost of cheque processing as the main reason for abolishing corporate cheques as a payment instrument altogether
The Monetary Authority of Singapore (MAS) announced that all corporate cheques will be fully eliminated by the end of 2025, although individuals will still be able to use cheques after the set deadline.
The respective decision was made as a result of naturally declining cheque usage in Singapore. While this payment means becomes more and more rare, its processing costs rise.
The days when the fixed cost incurred in cheque clearing was minimal are long gone. The average cost of clearing a cheque has quadrupled since 2016, reaching $0.40 in 2021. If the declining tendency continues, the projected cost of clearing a cheque will reach $2.00 – $6.00 by 2025.
Thus, banks cannot subsidize the costs anymore and will start charging for Singapore Dollar (SGD)-denominated cheques already by 1 November 2023.
As digital payment methods grow in popularity in Asia, annual cheque transaction volume in Singapore has declined by almost 70% in the last few years. The volume fell from 61 million in 2016 to less than 19 million in 2022.
While individual transactions are typically smaller, the corporate practice of cheque-enabled money exchange is too costly for all sides. Therefore, MAS has started several initiatives aimed at transiting cheque users to e-payment solutions.
In addition, the regulator has charged local banks with the task of building an electronic deferred payment system. It may leverage existing payment options like PayNow and Giro and should become a viable alternative to post-dated cheques. The new system is set to go live in 2025. After this, banks will stop issuing new chequebooks to corporates.
As for individuals, MAS will further study the use of cheques by this category, and assist remaining individual cheque users in their transition to alternative payment methods. The agency will conduct a second public consultation next year and set another timeline to eliminate individual cheques and put an end to the local Cheque Truncation System (CTS).
In June, Australia also announced its intention to end check payments. There, the number of paper checks has decreased by almost 90%, currently accounting only for 0.2% of the volume of non-cash retail payments.