e-Cheques; the end of paper cheques?

Black Cheque

From the beginning of December 2015 the Hong Kong government launched e-cheque payments by accepting settlement for government bills. The ‘Pay e-Cheque portal’ includes general demand notes, tax demand notes, business registration fees, tax reserve certificates andfacilities payments to many banks. 

For the initial stage, several banks (Agricultural Bank of China, Bank of China (Hong Kong), Chiyu Banking Corporation, Fubon Bank (Hong Kong), Hang Seng Bank, Nanyang Commercial Bank, The Bank of East Asia, The Hong Kong and Shanghai Banking Corporation and Wing Lung Bank) can currently issue e-cheques and facilitate direct settlement while other banks can only facilitate receiving e-cheques via the government e-cheque portal for now. Please see below a video released on the official government website regarding the formal launch of the e-cheque service.

It is estimated that over 400,000 cheques are cleared through Hong Kong Interbank per day at a cost of 1.7 billion to banks each year. Despite the financial costs to the system, there are environmental costs of the actual paper itself, envelopes used to post them, even the hassle of the person who has to deliver the cheque and/or wait in the queue to deposit the cheque at the bank. One other fact not mentioned are the compliance issues. Cheques are also thought to be a way of bypassing compliance checks by banks (for example, names that tend to be caught during electronic transfers by banks pass easily through the cheque system). The monetary authority and the association of banks have come together through financial technology to address the issues stated above.

Issued e-Cheques have a similar layout of a paper cheque except in PDF format and can be issued/delivered electronically. E-Cheques are to be available in HKD, USD, or RMB. For more information on e-Cheques and how to issue/deposit them, click here to read the brochure.

This is reminiscent of the ‘e-mail vs. fax’ battle and how one day fax will become obsolete due to the advantages of e-mail. E-mail is fast, instant, and always clear. But over time its disadvantages have become apparent, like hacking into e-mail accounts, spam, and the need for a modem and an internet connection with some basic computer knowledge.

Even though the younger generation has grown up with the knowledge of computers, there will be a similar problem with e-Cheques. As time goes on and people become familiar with e-Cheques, its popularity will grow, assuming its security features are sufficient and people don’t get tricked by fake e-Cheques. However, the only way to guarantee its success and truly make the paper cheque a thing of the past is for banks to eventually stop producing paper cheques altogether.

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