Singapore’s major banks, including DBS, UOB, OCBC, Citibank, HSBC, Maybank, and Standard Chartered, are set to introduce fees for customers issuing Singapore dollar cheques starting November 1st, as stated in a joint announcement by the Monetary Authority of Singapore (MAS) and the Association of Banks in Singapore (ABS) on July 28th. The rest of the banks will follow suit by July of the following year.
In addition to issuer fees, depositors of Singdollar cheques will also face charges, the implementation of which will occur in stages, with varying rates across different banks. Moreover, it was revealed that by the end of 2025, corporate cheques will be phased out entirely in Singapore. Individuals, however, will have the ability to use cheques for an unspecified duration beyond 2025.
The decision follows a public consultation led by MAS last year, which aimed to establish a strategy for phasing out cheques in Singapore, given the significant decrease in their use. Over the past six years, annual cheque transaction volume has plunged by almost 70%, from 61 million transactions in 2016 to 19 million in 2022, owing to the rising popularity of electronic payments among both corporations and individuals.
For example, DBS, Singapore’s largest lender, has reported a consistent annual decrease of up to 25% in cheque usage among its corporate and retail customers, paralleled by the steady growth of e-payment adoption. Similar trends were reported by Citibank, which has noted a 22% year-on-year increase in instant payment volumes among corporate clients in Singapore, coupled with a 13% decrease in cheque usage.
Despite the shrinking use of cheques, banks still have to bear fixed costs associated with their processing, including the costs of clearing, collecting, handling, and verifying cheques. As a result, with the reduction in cheque volumes, the average cost of clearing a cheque has surged fourfold since 2016, reaching 40 Singapore cents in 2021 and projected to increase to between S$2 and S$6 by 2025.
Furthermore, with the anticipated cost increase, banks will no longer be able to subsidize cheque processing costs and will be compelled to pass these costs on to their customers. There are also plans underway to introduce charges for US dollar cheques, with individual banks set to provide more information on this in due course.
Currently, several banks, including DBS, OCBC, UOB, Citi, and Maybank, already impose charges for corporate Singdollar cheque usage, with rates and policies varying by bank. Following the recent announcement, these and other banks will provide further details regarding their respective fee structures in the coming months.
