Cheque-mate: Chalmers makes final move on dying payment network

The cheque will no longer be in the mail.

Treasurer Jim Chalmers on Wednesday will unveil plans to finally end the dying cheque network by 2030 as part of a suite of changes to upgrade the nation’s payments system.

Chalmers will use a speech to the Australian Banking Association in Sydney to argue the infrastructure supporting payments, from individuals to businesses, is “clunky, inefficient and cumbersome to maintain”.

Cheques, the use of which has collapsed by 90 per cent over the past decade, are now well beyond their use-by date.

“Currently, 98 per cent of retail cheques could be serviced through internet or mobile banking and 100 per cent of those used in institutional and commercial settings,” he will say.

While ending cheques, the government will support Australians’ access to cash.Credit: Illustration by Matt Golding

“All this means that leaving cheques in the system is an increasingly costly way of servicing a declining fraction of payments. That’s why we want to systemically transition these transactions to digital, improving the efficiency of your sector and getting Australians their money faster.”

Cheques will not disappear immediately.

Chalmers said this year the government would consult with the states and territories, industry and community organisations about the planned phase-out. By 2028, the government plans to end its use of cheques and to remove any legislative requirements for their use.

At their peak in the early 1980s, cheques accounted for 85 per cent and almost all the value of non-cash payments.

But their use started a downward spiral in 2004. In January that year, almost 12 million personal cheques worth $22.1 billion were written. By March this year, just 527,000 cheques worth $2.7 billion were written.

The Reserve Bank has been noting the eventual demise of the cheque system for years. One growing problem has been their cost – banks charge up to $20 to issue a bank cheque and also charge processing fees for personal cheques written by customers.

Commercial cheque use has followed a similar collapse, falling from 30 million worth $106 billion in January 2004 to 1.1 million worth $9.6 billion in March this year.

The federal government has wound back its use of cheques over recent years. Welfare cheques stopped being issued in 2016, while Medicare and Pharmaceutical Benefit Scheme rebates are no longer covered by cheques.

The chair of the Australia Banking Association, Peter King, said the government’s move would help lift productivity across the entire payments system. “We welcome the phasing out of cheques and we’re ready to work with government to get it done,” he said.

The move will eventually bring Australia in line with many European countries where the cheque system has either been killed or where a person cannot write a cheque. Finland eliminated cheques in 1993, while Dutch banks have not accepted personal cheques since 2001.

Major British service stations, retailers and supermarkets stopped accepting cheques in 2005, although they remain in circulation. New Zealand banks stopped processing cheques in 2021.

While ending cheques, Chalmers will re-commit the government to support Australians’ access to cash.

While actual use of cash has fallen sharply, especially since the pandemic, the total number of $100 and $50 notes technically in circulation remains near record levels.

Jim Chalmers says the country’s payments system is creaking and needs to be overhauled.Credit: Alex Ellinghausen

Chalmers said Treasury would look at ways to ensure people could continue to use cash. The government would also support the Bank@Post network that is used in almost 1800 rural and remote areas.

Chalmers will also outline other broad reforms to the payments system, which has changed dramatically in recent years due to advances in technology and a surge in cyber-sabotage.

The government plans to update regulations governing the payments system, including the use of digital wallets, and to update the supervision of payments. This includes the creation of the National Anti-Scam Centre and the Responsible AI Adoption program.

The Reserve Bank and the Digital Finance Cooperative Research Centre will soon release their research on a central bank digital currency ahead of a discussion about possible options for the currency next year.

“Our strategy, our agenda, is to address and resolve these issues, to remove the barriers that are inhibiting the development of a modern payments system,” Chalmers will say.

“But our plan for payments is about a lot more than triaging the problems we face now or playing catch-up and patch-up.”

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