How Barbados is Preparing to Modernise its Payments System

When it comes to making payments, there are lots of options, and these will only continue to multiply as technology improves and makes methods that were once hard to imagine reality. But, even as we continue to move forward, it’s important that there are guardrails in place.

That’s why the Barbados National Payments Act was passed in February 2021. This new legislation is intended to help modernise the payments landscape in Barbados while making sure that users’ interests are looked after. Under this new legislation, the Central Bank of Barbados will have oversight of Barbados’ financial system.

But even before the new Act was passed, the Bank was responsible for supervising the activities of commercial banks and deposit-taking finance and trust companies, ensuring that they comply with local and international financial regulation and guidelines.

The Bank also owns and operates Barbados’ Real Time Gross Settlement (RTGS) system, which is used to settle large value transactions – In 2020, it facilitated $14.8 billion in payments. The RTGS system is also used to help settle payments made through the Automated Clearing House (ACH), which handles both cheques and direct payments that are of low or medium value. The ACH handled $17.3 billion in transactions last year.

The new Act clears the way for the ACH to be upgraded and expanded to include credit unions. Lisa Brathwaite-Phillips, an Economist at the Bank explains how this will benefit Barbadians:

“They are shifting the system to a real-time settlement system, which would allow for instantaneous transfers. There are also changes within the process for cheque payments, where financial institutions can now use a digital representation of the cheque to be able to clear it so the transfer can happen a lot faster than it is now, where it usually takes seven or more days… Most of these upgrades will make the transfer of funds a lot faster, so I can now transfer funds to your account and you should get the money right away in most cases.”

The upgraded ACH is only one example of the enhancements being planned for the local payments system. With other forms of digital payments becoming popular and offering the possibility of greater efficiency for businesses and other entities, the new Act focuses heavily on these as well.

Octavia Gibson, the Bank’s Director of Currency and Payments Oversight, concurs that there is a great deal of interest in these forms of payment among the public, but that people still want to make sure their money is safe, so “the Bank has a responsibility to ensure that all these players are operating according to the various standards that have been set.”

She explains that financial institutions who are already being regulated will not have to be re-licenced, but that there will be specific criteria that entities that are hoping to enter the market for the first time must meet.

To help the Bank oversee the payments system, the Act makes way for the establishment of a payments council, the members of which will come from different interest groups. Gibson reveals the composition of the council:

“The council is made up of 10 persons: three selected by the Minister of Finance. There are also two chosen by the Central Bank of Barbados, and these would be the chairman and the deputy chair. One from The Barbados Bankers Association, one from the Barbados Cooperative Credit Union League, and one from the FSC (Financial Services Commission). There’s an independent, who will focus on consumer affairs. And then there’s one other person, who has the aptitude for legal, business, and operating a payments system.”

Gibson explains that the council’s role will be to advise the Bank on a range of matters, including fees, interoperability of the system, standards, and technical specifications.

The ultimate goal is to have a total picture of what is happening in the payments landscape and to facilitate progress while still protecting Barbadians. After all, this is people’s money we’re talking about.