Paper share certificates are quickly becoming relics of the past. In 2025, Australia’s financial system is making bold moves to fully embrace dematerialization (DEMAT), a shift that promises to streamline investing, reduce fraud, and improve efficiency for investors and companies alike.
What is Dematerialization (DEMAT)?
Dematerialization, or DEMAT, refers to the process of converting physical share certificates and other securities into electronic records. Instead of handling stacks of paper, investors now manage their holdings through digital accounts—commonly called DEMAT accounts. This trend isn’t just about convenience; it’s about modernizing markets to keep pace with global best practices and regulatory requirements.
Australia has been a leader in this space, with most listed equities already traded electronically. But 2025 marks a new era, as regulators and exchanges push for the complete elimination of physical securities, impacting everything from shares and bonds to managed funds.
The 2025 Push: ASX CHESS Replacement and Regulatory Momentum
The Australian Securities Exchange (ASX) has been preparing to replace its legacy CHESS settlement system with a new, fully digital infrastructure. While the project faced delays in recent years, 2025 is set to see renewed urgency:
- CHESS Replacement: The new platform will be built with dematerialization in mind, supporting real-time electronic settlement and cutting out manual paperwork for good.
- Regulatory Pressure: ASIC and the Reserve Bank of Australia have both issued 2025 guidelines urging companies to phase out paper securities entirely, citing operational risk and cost concerns.
- Global Alignment: Australia’s moves mirror those in Europe and Asia, where full dematerialization is becoming the norm, reducing cross-border friction for investors.
For investors, this means that all new share purchases, dividend payments, and corporate actions will be handled digitally—no more lost certificates or slow mail-outs.
How DEMAT Accounts Work for Everyday Investors
Every Australian investor who buys shares through a broker already interacts with a DEMAT system, even if they don’t realize it. Here’s what the process looks like in 2025:
- Account Opening: Investors open a DEMAT account with a broker or directly with the ASX’s CHESS system, linking it to their identity and bank account.
- Electronic Holdings: Shares, bonds, and ETFs are credited directly to this account, visible online and transferable at the click of a button.
- Reduced Paperwork: No need to sign or mail physical documents for most transactions. Corporate actions like rights issues or takeovers are handled digitally.
- Security: Digital records reduce the risk of loss, theft, or fraud compared to paper certificates. Enhanced cybersecurity is now a key focus for brokers and custodians.
For long-term investors, this means a faster, more transparent experience. For those used to handling paper statements, 2025 may be the year to fully embrace the digital shift.
Benefits and Challenges: What to Watch in 2025
Benefits:
- Lower Costs: Companies and brokers save on printing, postage, and manual processing. These savings are often passed on through lower fees.
- Faster Transactions: Buying, selling, and transferring securities is nearly instantaneous, supporting more dynamic trading strategies.
- Transparency: Investors can track holdings and activity in real time, improving oversight and compliance.
Challenges:
- Digital Divide: Older investors or those without reliable internet access may need support transitioning from paper-based systems.
- Cybersecurity: As everything moves online, protecting DEMAT accounts from hacks and scams is a top priority for regulators and brokers alike.
- Legacy Holdings: Some historic or unlisted securities may require manual conversion processes, with deadlines looming in 2025.
Real-world example: In early 2025, a major Australian mining company completed its final migration of legacy paper shareholders to the DEMAT system, unlocking instant dividend payments for thousands of investors who previously waited weeks for cheques.
What Investors Should Do Next
With the 2025 deadlines fast approaching, investors should:
- Check if any of their holdings are still in paper form and contact the issuer or broker to initiate dematerialization.
- Review their DEMAT account security settings—enable two-factor authentication and keep personal details up to date.
- Stay informed about the ASX CHESS transition and any new features offered by brokers to support digital investing.
