Are Demand Drafts Still Relevant in Australia in 2025?

Demand drafts have long been a staple for secure, bank-issued payments in Australia. But as instant payments and digital wallets redefine how we move money in 2025, are demand drafts still useful for Aussies? Let’s unpack their role, where they’re still relevant, and what you need to know if you’re considering one this year.

What Exactly Is a Demand Draft?

A demand draft (often called a “bank draft”) is a prepaid, bank-issued payment order. Unlike a personal cheque, funds are debited from your account upfront, making the draft a guaranteed form of payment. Banks physically issue these drafts, which can be sent domestically or internationally. The recipient deposits the draft into their account, and their bank collects the funds from the issuing institution.

• Secure: Funds are paid in advance—no risk of bouncing.
• Widely accepted: Used for large transactions, such as property purchases, tuition fees, or international transfers.
• Traceable: Each draft has a unique serial number for tracking.

For decades, demand drafts were the go-to for high-value payments that required extra security. But with real-time payments now the norm, the way Australians use demand drafts is changing.

How Demand Drafts Work in Australia (2025 Update)

Despite the rapid adoption of digital banking, all major Australian banks still issue demand drafts—though the process is less common than it was even five years ago. Here’s how it works today:

1. Application: You visit a branch (or, with some banks, apply online) and request a demand draft. You’ll need the recipient’s full details and the exact amount.
2. Payment: The bank withdraws the amount (plus a fee, typically $10–$20) from your account immediately.
3. Issuance: The bank prints the draft. You can collect it or have it mailed to the recipient.
4. Redemption: The recipient deposits it at their bank, which processes the payment through interbank clearing.

2025 policy note: With AUSTRAC’s ongoing push for anti-money laundering (AML) compliance, banks now require stricter ID verification and may flag large or overseas drafts for extra scrutiny. Some banks have also reduced daily limits for drafts as part of enhanced risk controls.

Are Demand Drafts Still Useful in 2025?

While digital payments are king, there are situations where demand drafts still shine:

• International Payments: Some overseas institutions, especially in South Asia and Africa, still require demand drafts for tuition or business fees.
• Large or Sensitive Transactions: If a recipient won’t accept a personal cheque or direct deposit, a demand draft offers guaranteed funds.
• No Bank Account: Some recipients, especially in rural or remote areas, may not have access to digital banking and prefer a physical draft.

However, for most everyday needs, Australians now prefer:

• Osko and NPP (New Payments Platform) instant transfers
• BPay for bills
• SWIFT wire transfers for international business
• Digital wallets (Apple Pay, Google Pay, etc.)

Banks have responded by making demand drafts a bit harder to access—often requiring in-person visits and higher fees. This signals a shift: drafts are now a niche tool, not a mainstream payment method.

Real-World Example: Using a Demand Draft for Overseas Tuition

Consider Priya, an international student paying her first-year tuition at a university in India. The university requests a demand draft in Australian dollars for fee security. Priya’s local bank issues the draft, which she sends via courier. The university deposits it, and Priya is enrolled without the delays or uncertainty that sometimes come with international wire transfers or online payment portals.

In this scenario, the demand draft offers certainty—both parties know the funds are secure and traceable, which helps with cross-border compliance and peace of mind.

Alternatives and the Future of Demand Drafts

With the Reserve Bank of Australia (RBA) focusing on digital payment infrastructure in 2025, expect demand drafts to become even rarer. Most institutions encourage instant, traceable payments via NPP or SWIFT. However, for legacy systems and conservative recipients, the demand draft still has a role—just a smaller one.

Key takeaway: If you’re asked for a demand draft, check if the recipient will accept a faster, more modern alternative. But if you need the old-school security of a bank-guaranteed payment, demand drafts remain a safe, if slightly retro, choice.