Digitisation project to cut cost of cheques

The Australian Payments Clearing Association will introduce new digital cheque imaging technology in June, paving the way for the physical exchange of cheques to be replaced by electronic transmission.

Under current arrangements banks send electronic records of cheques received to the paying bank and payments are settled on that basis. The physical cheque is sent later.

The system to go into operation in June will allow banks to digitize cheques they receive and send the digitized image electronically to the paying bank, with no requirement to send the physical cheque.

APCA chief executive Chris Hamilton said the new process would make the cheque system more efficient but he could not quantify the cost saving.

Hamilton said: "It will vary from bank to bank. Some have done more work than others to centralise their cheque processing, and their ability to take advantage of this technology will vary accordingly."

After canvassing the prospect of phasing cheques out a couple of years ago, the industry's position is that they will be available as long as people want them.

"It is open to financial institutions to supply them. The clearing system will support them," Hamilton said.

Hamilton said the Australian cheque system was more efficient than many other markets but cheques were still relatively expensive payment instruments.

Last week APCA issued a report on the payments industry, which showed that cheque use fell 13.9 per cent last year, compared with an 8.8 per cent increase in the use of debit and credit cards.

APCA's report cited Reserve Bank data, which shows that cheques are the most expensive payment instrument. For an average sized transaction, the "resource cost" of a cheque is A$5.37. The cost of a Bpay payment is about 40 cents.