SINGAPORE: Banks in Singapore will start charging customers for issuing Singapore dollar cheques by Nov 1, the Monetary Authority of Singapore (MAS) and the Association of Banks in Singapore (ABS) announced on Friday (Jul 28).
At least seven banks – DBS, UOB, OCBC, Citibank, HSBC, Maybank, and Standard Chartered – will start imposing fees on cheque issuers, both corporates and individuals, by then.
Other banks will do so by July next year.
There will also be separate charges for depositors – both corporates and individuals – of Singdollar-denominated cheques. This will be implemented in phases and charges will vary among banks.
It was also announced on Friday that Singapore will eliminate corporate cheques by end-2025.
Individuals will still be able to use cheques “for a period” after 2025, MAS and ABS said in a joint media release, without specifying a date.
FALLING CHEQUE USAGE
Cheque usage in Singapore has been falling steadily, while there has been growing adoption of e-payments by corporates and individuals.
Annual cheque transaction volume fell by almost 70 per cent from 2016 to 2022, from 61 million to 19 million.
Banks incur a “fixed cost” when it comes to processing of cheques. These costs include cheque clearing costs and other bank operating costs, such as the collection and handling of cheques, data capture, as well as imaging and signature verification.
An online image-based cheque clearing system, called the Cheque Truncation System, has been in use by banks in Singapore since 2003. With the system, cheques are scanned when deposited and their electronic images, instead of the physical cheques, are transmitted throughout the clearing cycle.
With falling volumes, the average cost of clearing a cheque has quadrupled since 2016 to 40 cents in 2021.
This is set to increase to between S$2 and S$6 by 2025, if cheque volumes fall by another 70 per cent by then, said MAS and ABS.
Most banks have been subsidising the cost of cheque processing. But given the expected increase, banks will no longer be able to absorb these cheque processing costs and will have to reflect the cost of processing in their charges to their customers, said MAS and ABS.