Cheque usage falling as consumers, businesses switch to digital payments

Cheque usage falling as consumers, businesses switch to digital payments

Fewer consumers and businesses are using cheques as more convenient digital payment solutions gain currency amid Singapore's drive towards a cashless economy.

SINGAPORE: Fewer consumers and businesses are using cheques as more convenient digital payment solutions gain currency amid Singapore's drive towards a cashless economy.

According to banks Channel NewsAsia spoke to, cheque usage has fallen in recent years among both individual and corporate clientele.

From 2016 to 2017, Standard Chartered saw a drop in personal cheque transactions by 12 per cent, while United Overseas Bank saw a drop by 15 per cent and DBS registered a decline of 11 per cent.

Meanwhile, Standard Chartered's corporate cheque transactions declined by 17 per cent, while local banks DBS, OCBC and UOB each saw a slight dip of 5 per cent.

The four banks also saw a corresponding increase in digital transfer payments through electronic funds transfer services such as Fast And Secure Transfers (FAST) and PayNow. 

Launched in July 2017, PayNow allows consumers to transfer funds using the recipient's mobile or identification number. As of end-March, more than S$470 million had been transferred via the peer-to-peer fund transfer tool, which has more than 1.2 million registrations.

Two new banks - Bank of China and Industrial and Commercial Bank of China - also hopped on the bandwagon to offer PayNow on Apr 9, along with seven existing banks. With the service to be rolled out to businesses in the second half of the year, consumers will be able to use PayNow to pay merchants for their purchases in the near future.

"Average consumers today are looking for instant fulfilment when it comes to their services and payments," said Ms Jasmin Ng, managing director of global transaction services at DBS.

"Businesses also need to start adapting to fit this demand. Progressively year-on-year, we do see people adopting digital payment modes. Customers are also influencing them, asking for more instant payments.”

Between 2016 and 2017, DBS saw a jump in corporate usage of FAST by 250 per cent, while Standard Chartered saw a rise by 66 per cent. OCBC also registered a 25 per cent increase in digital payments in the first quarter of 2018, compared to the previous year. 


But with six in 10 transactions still being done through cash or cheque, some sectors lag behind in adopting e-payments.

"The way businesses are structured, they prefer cheques because of the nature of payments, so that could be one factor," said Mr Aditya Gupta, head of e-business at OCBC.

"Second is consumer-led, on account of lack of awareness or discomfort around anything digital," said Mr Gupta.

A mindset shift is required among industry players before digital payment solutions will gain a strong footing, according to Ms Priscilla Soh, head of Singapore transaction banking at Standard Chartered.

"Like all organisations, big or small, there will be established processes and policies," said Ms Soh. "Unless there is a mindset change, adoption will always be slow. (But) when there’s a new system, it is a great opportunity to ... to look at how things can be done better.”

One bank that is helping to push the industry forward is DBS, which developed application programming interfaces (APIs) last year for the insurance industry. The sector accounts for about 10 per cent of the corporate cheques issued by the bank.

So far, the bank has partnered six insurance companies to offer its APIs as a direct bridge to credit insurance claims into policyholders' bank accounts.

"Previously they would have to wait for the cheques to arrive at their home, and probably they may not immediately go to the bank - they will take some time to make a trip down to the bank to deposit the cheque and see it get cleared into their accounts," Ms Ng of DBS said.

With e-payments, the time taken for payments to be processed has been cut by four days.


According to Ms Ng, the bank also has plans to work with the healthcare sector, government agencies as well as small-and-medium-enterprises to help them move towards digital payment solutions. 

In light of this, the bank has projected a 30 per cent fall in corporate cheque usage by 2020, which would lead to a reduction of "millions of cheques" issued by companies.

Other local banks have also taken steps to encourage more consumers to go digital, including UOB, which introduced a payroll service in 2015, allowing businesses to credit salaries directly into employee accounts - a move which can cut at least 40 per cent in payslip management costs, as opposed to manual processes involving cash and cheques.

"We don’t expect a 100 per cent migration to cashless payments, let’s be honest," said Mr Gupta. "There’ll be some consumers who will continue to use cheques.”

"But I see in the next two to three years we’ll reach the tipping point, over the next seven to eight years, cheques will be the minority.”

Source: CNA/na(hm)