Australians Embrace Digital Payments as Cheques Become Obsolete
The Australian government, in line with the rise of digital payments and instant bank transfers, has announced plans to phase out the use of checks by 2029. This move aims to reduce transaction costs, improve productivity in the financial system, and facilitate faster and cheaper methods of transferring money.
In 2004, over 10,000,000 personal checks were used every month. However, processing a check can take 3 to 7 days, while digital payments happen instantly for near-zero cost. This discrepancy, coupled with the growing popularity of digital payments, has led to the decision to phase out checks.
By 30 June 2028, Australian banks will cease issuing personal, commercial, government, and bank checks. Banks will need to provide 6-month warnings to customers ahead of any decision to shut down their checking operations. Checks written before 30 September 2029 will still be able to be cashed within their usual period of validity before the system is shut down.
The shutdown of the domestic Australian checking system will not impact foreign checks coming into the country. Banks ceasing checking operations must still remain members of the Australian Paper Clearing System and fund it.
There are concerns that some banks may attempt to leave the checking system before the government-set shutdown date, burdening other financial institutions. To address this, the government expects Tier 1 banks to maintain operations until the end date to support smaller institutions that rely on them for check clearing services.
Companies are also being questioned for using checks to issue refunds in this day and age. With digital payment options becoming more prevalent, the use of checks for such transactions seems outdated and inefficient.
Despite the impending phase-out, checks will not technically "go stale," leaving an open question as to whether they will be honored after 30 September 2029. The government's Strategic Plan for Australia's Payments System, released in June 2023, discusses this issue, but no definitive answer has been given as of yet.
The check, a standard method for moving money between bank accounts, consists of a codified document with necessary information for processing. However, its slow and unwieldy nature has led to its decline in favour of faster, more cost-effective digital payment methods.
The Australian government and financial institutions have time until the shutdown to ensure alternative payment methods are in place for remaining check use cases. As of now, no relevant information about the name of the bank planning to cease check services earliest in Australia before the official shutdown of the check systems has been found.
In 2024, less than 0.1% of retail payments within Australia were made using checks, underscoring the growing trend towards digital payments. The shift away from checks is expected to continue, marking a significant change in the way Australians manage their finances.
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