Finland eliminated cheques in 1993 and Dutch banks haven't accepted personal cheques since 2001. Danish banks stopped accepting cheques in 2017 and major service stations, retailers and supermarkets in the UK joined the trend from 2005, where cheques remain in circulation but at vastly reduced rates. Closer to home, Kiwibank was the first of New Zealand's banks to stop processing cheques, with the country's remaining banks following in July 2021.
Whilst we await the formal outcome of the Federal Treasury consultation, we know Government intends to wind down the cheques system in Australia by no later than 2030, with government use to be phased out by the end of 2028. The Reserve Bank of Australia (RBA) triannual 2022 Consumer Payments survey confirmed that cheques represented just 0.1% of all payments. RBA Retail Payments data from May 2024 shows that just 1.3m cheques were issued in the previous 12 months and dropped 17% in value to $17.9 billion.
Some industry sectors have eliminated cheques altogether. The Department of Human Services stopped issuing cheques for welfare payments through Centrelink in 2016 and Medicare and Pharmaceutical Benefits Scheme rebates and refunds soon followed.
AMP was the first of Australia's financial services organisations to stop issuing and processing cheques from its own customers, and major banks have announced they no longer offer cheque books for some existing and any new accounts.
Moves to phase out cheques gather pace in Australia
Legislation still requires cheques to be used in some instances and Treasury has recognised the need for legislative change as essential, with many submissions noting this issue. It remains to be seen if Treasury also revisits the now lapsed Treasury Laws Amendment (Modernising Business Communications) Bill 2022, to go beyond cheque closure and support wider opportunities to reduce paper documentation and ‘wet' signatures.
All financial institutions in Australia use the one system to process cheques and as volume declines, the cost per cheque has increased significantly. And whilst increasing cost is one aspect, it is the out-dated state and federal legislation or formalised rules based on the legislation, that many say prevents them from reducing or eliminating cheques.
"Despite this, there are businesses and government departments that have actively reduced cheque issuance and removed cheques as a payment channel for their customers," says Sam Bowen, Managing Director, Corporate and Institutional Transaction Banking at CommBank.
"They tell us the number one reason for cheques is because they cannot contact the recipient and only have a last known location address, not an account number. Confirmation of a closure date will be welcome news to those who have worked hard to largely remove cheques from their operations."
For those who have not actively reduced acceptance or issuance of cheques, perhaps constrained by the need to be mindful of those that are not digitally engaged, we anticipate the closure of the cheque system by 2030 adds to the opportunity for deeper business change.
Eliminating cheques just one part of business transformation
"Changes to Australia Post delivery schedules, postage charges and even the cost of paper add to the high cost and inefficiency of cheques," says Bowen. "Business transformation is occurring for a range of increasingly pressing reasons, including improved productivity & business cash flow, frequently customer expectations and often ERP and other systems reaching end-of-life."
Facing a multitude of rapidly increasing risks, where real-time information drives better decisions, leaders are asking finance teams to deliver on business strategy and risk management. Replacing cheques is a key step to update payment solutions that support our clients to free up staff to take on key strategic tasks.
How can CommBank help?
Bowen says many clients are faced with a number of high-priority risks, and cheque removal can be pushed to the bottom of the list, particularly if the business has managed to minimise cheque usage. But with a deadline expected, it can be a key step on a much bigger journey.
For some removing cheques leaves a gap in meeting obligations, uniquely, CommBank Benefits Finder is a proven way we can encourage your customers to contact you to provide banking details; or perhaps our innovative API driven PowerBoard eCommerce solution provides the alternative payment options to replace cheques. If you're seeking a wider review of your accounts receivable and accounts payable systems, CommBank's Client Consulting Team can map processes and help your business to become more efficient. Please contact your Relationship or Account Manager to discuss.
Sam Bowen, Managing Director, Corporate and Institutional Transaction Banking at CommBank, has a strong background in payments and a keen interest in helping clients automate and improve their payments processes.
