With alternative payment options including mobile wallets and bank transfers on the rise, the Bank of Jamaica (BOJ) is backing a Jamaica Bankers Association project aimed at eliminating local cheque usage.

“This project, which is expected to span three years, is still in an embryonic stage. The lead on this project is the JBA,” the BOJ said in response to an Our Today e-mail. “The rationale for such a project is the diminishing importance of this method (cheques) as a retail means of payment and the high incidence of cheque fraud.”

The BOJ was responding to an Our Today query regarding the reduction in the time to negotiate cheques between banks and the possibility of eliminating cheque payments, similar to other Caribbean jurisdictions.

Since August 6, the processing of cheques between banks in Barbados has been reduced from three to five business days and then down to one business day. This was achieved when the Central Bank of Barbados introduced a new digital clearing system.

The Eastern Caribbean Central Bank undertook a similar exercise back in 2018 when it cut cheque clearance to two days.

“Given the existence of this project, the focus is not on reducing the clearing period for cheques from the current three days, rather, all energies are geared towards elimination,” the Bank of Jamaica said.

In the Bahamas, the central bank has appointed a steering committee and undertaken a study to determine whether or not to continue using paper cheques in that economy and the timeline to implement the proposal. The Central Bank of The Bahamas first announced plans in 2021 to phase out cheque payments in that economy.

In its latest update, The Bahamas’ central bank said, “…the Steering Committee on Cheque Elimination and Reduction determined that an extended timeline, beyond the end of 2024 was necessary, to allow the public to transition away from cheques. The Steering Committee also endorsed that a public education campaign could be formulated to assist the transition; alongside reforms to improve access to, and the efficiency of digital alternatives to cheques.”

Both the Central Bank of The Bahamas and the Eastern Caribbean Central Bank have introduced central bank digital currencies (CBDC)—the Sand Dollar and D-Cash, respectively—that allow citizens in those economies and currency unions to transfer funds between each other.

The Bank of Jamaica, following a pilot period in 2021, rolled out its CBDC, Jam-Dex, with the National Commercial Bank Jamaica’s subsidiary TFOB (2021) Ltd providing mobile wallet capabilities with Lynk. Jamaica National Bank and Sagicor Bank Jamaica were onboarded as mobile wallet providers in 2022 and 2023 respectively.

At the same time, the introduction of other electronic wallets such as MyCash, WiPay, GK M-Pay, and Lasco Visa Gold, have enabled person-to-person funds transfers outside of the CBDC ecosystem.

Online banking has also made it easy for people and businesses to complete intrabank funds transfers.

With regard to businesses, the BOJ’s real-time gross settlement (RTGS) has contributed to the reduction in cheque negotiations between commercial banks. “RTGS was introduced to reduce the settlement risks associated with batch processing of transactions in the ACH [automated clearing house],” central explained.

“The threshold limits were introduced on all ACH transactions—currently at $1 million. So transactions exceeding the limit must be settled in the RTGS. Persons with transactions at or below the limit may also use the RTGS if the transaction is time-sensitive,” it added.

In 2009 the central bank introduced real-time gross settlement to process large-value and time-critical payments. Over a phased period, the bank introduced limits on the amount of funds negotiable by cheque to encourage the use of RTGS, starting at $5 million in 2011. By May 2016, amounts exceeding $1 million could only be transacted through RTGS.

Now, as the BOJ supports the JBA’s push to eliminate local cheques, the central bank noted that there are considerations to resolve before moving forward with the plan. They include:

• Legal: Looking at existing legislation to see if there is any existing law preventing cheque elimination;
• Operational: How to implement and the best time for doing so;
• Communication: Ensuring all key stakeholders are on board.

As far back as 2006, the BOJ has been targeting the reduction and possibly the elimination of cheques.

In a strategy document titled “Vision of the Future National Payments Systems” dated March 2006, it outlined, “The BOJ will adopt the necessary measures to reduce the systemic importance of the cheque clearinghouse. Other systemically important payment systems could be introduced in Jamaica by the private sector, provided that they meet fully the CPSS Core Principles and have been authorised by the BOJ in the context of the payment system oversight function. The existing ACH is designed to operate efficiently and facilitate the move towards electronic credit and debit instruments and will thereby reduce the systemic importance of cheques.”