Banks to charge for use of Singdollar cheques by Nov 1, to stop taking corporate cheques by end-2025
SEVEN banks in Singapore – DBS, OCBC, UOB, Citibank, Maybank, Standard Chartered and HSBC – will start charging for the use of Singapore dollar-denominated cheques by Nov 1.
Other banks will do so by Jul 1, 2024. These charges apply to corporates and individuals who issue cheques, and will vary between banks.
Another change is that all banks will stop issuing new cheque books to corporates in 2025. The use of corporate cheques will be eliminated by the end of that year.
The new rules were introduced by the Monetary Authority of Singapore (MAS) on Friday (Jul 28), following a public consultation on the proposal to end the use of cheques.
Banks in Singapore are already charging for the issuance of corporate cheques, but not for individual cheques. This will change for all cheque issuers from Nov 1, in light of the rise in cheque-processing costs amid a steady decline in the volume of cheque usage, noted MAS.
Between 2016 and 2021, the average cost of clearing a cheque quadrupled to S$0.40. But the number of cheques used fell by almost 70 per cent – from 61 million in 2016 to under 19 million in 2022.
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The cost of clearing a cheque is expected to reach between S$2 and S$6, assuming cheque volumes fall a further 70 per cent by 2025. Citibank, for example, said it receives fewer than 100 requests for cheque book replenishments monthly as the number of cheque accounts on its platform has been steadily declining – by about 20 per cent year to date.
“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,” said MAS in its statement.
It is therefore allowing banks to charge a fee for those who continue to issue Singapore dollar-denominated cheques.
Those who deposit such cheques will be charged a fee down the road; details will be announced later.
MAS also has plans to roll out charges for US dollar-denominated cheques, though the timeline for this has not been announced yet.
The charges for issuing Singdollar-denominated cheques were not disclosed, though MAS said the banks will inform their clients of such fees ahead of time. At present, local banks charge around S$0.75 for each issuance and deposit of corporate cheques. This is set to rise, come Nov 1.
Some concerns were raised during MAS’ consultation with the public over its proposal to eliminate corporate cheques, including the widespread use of post-dated cheques.
In response, MAS said the Association of Banks in Singapore (ABS) will work with the banks to build an electronic deferred payment (EDP) solution, which will enable users to make a deferred payment or issue a cashiers’ order, without the need for cheques.
The EDP solution will leverage existing payments solutions such as PayNow and Giro. It will be ready by 2025.
Individual cheque users, on the other hand, will still be able to use cheques for a period beyond 2025. MAS said it plans to launch another consultation paper next year, which will look into eliminating such cheques and phase out the use of cheques eventually.
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