The Automation of Cheque Clearing System in Malaysia

Cheque clearing is one of the main banking activities in the Financial Institution. Prior to December 1998, the cheque clearing process in Malaysia were done on manual basis where all the cheques collected by the banks were physically brought to the ‘Clearing House’ (i.e. Bank Negara Malaysia) for exchange and settlement process.

During this period all cheques collected by the Collecting Bank were physically sorted by location before sending it to the ‘Clearing House’ for settlement. At that time, the number of day ‘float’ for the cheque to be cleared will depend on the location of the Paying Bank branch. To a certain extent the days clearing ‘float’ can be as long as 14 working days.

Figure 1 below illustrates the Cheque Clearing process during that period.

In early 1998, Bank Negara Malaysia have embarked in enhancing the process by introducing the new system of cheque clearing and settlement namely, Sistem Penjelasan Informasi Cek Kebangsaan Secara Elektronik e(SPICK). With the implementation, there will be no more physical movements of the cheques from the collecting bank/branch to ‘clearing house’. Instead, the images of the cheques deposited will be forwarded or transmitted to paying bank via the ‘clearing house’ for settlement and payment. 

Figure 2 below illustrates the electronic cheque clearing process after the implementation of eSPICK.




As one of the team members that was involved in the automation of the clearing process for one of the commercial bank, I personally believed that the automation have benefited both the customer and the participating Banks. Among the benefits that the customer have gained thru the automation are:

a) Shorter time frame for the cheque deposited to be cleared (within 2 working days) as compared previously where the day hold are between 2 – 14 working days depending on the location where the cheques are drawn.

b) Commission charged to the customer for any ‘outsation’ cheque deposited have been abolished since there are no more handling chargse for sending the cheque to the paying bank.

However, the improvement also has some risk element to the paying bank where the onus of ensuring the genuiness of the cheque presented still goes back to the paying bank. Moreover, verification of the signatories on the cheques are done electronically where it is quite difficult for the verifier to detect irregularities on the cheque.

Although the enhancement are facing the above potential risk, all participating commercial banks still proceed with the implementation as the improvement was able to reduce the overall cost for the cheque clearing and additional measures have been implemented to mitigate the incident occurrence.