Innovations in Barbados’ Payment Systems

Technological advancements are altering the payments space by transforming the way transactions are executed in the domestic market. Credit and debit cards already supplement more traditional cash and cheque payments processes. Direct transfers via the Automated Clearing House (ACH) and Real Time Gross Settlement (RTGS) together with online banking within and across banks are complemented by a payments processor who intermediates mainly high volume, low value transactions. These developments are designed to reduce the use of cash and to improve efficiency in the payments system. However, productivity continues to be impacted by consumer use of physical locations which, along with delays in cheque clearing and back office processing, renders part of the payments system inefficient.

The Central Bank of Barbados, financial institutions, and Government are keen to address these inefficiencies. Government has embarked on a process to eliminate its issuance of cheques and to instead rely on the ACH and RTGS to make payments to suppliers and for the issuance of tax refunds. The National Insurance Board, which is one of the island’s main issuer of cheques, is also moving towards a phased elimination of cheques. Additionally, the Barbados Revenue Authority is working towards accepting online tax payments via the banking system, and through credit and debit cards. This should reduce both queues and the use of cheques.

To facilitate expanded use of the ACH, the Bank will allow access to the ACH system to credit unions that wish to do direct debits. This is a potentially significant development in the payment system given the growing importance of the credit union segment to the overall financial sector. This innovation requires the adoption of legislative, infrastructural and administrative changes that are expected to come on-stream during the second half of 2019.

An interesting development is the emergence of digital wallets for the conduct of financial transactions by non-traditional players. The Central Bank and the Financial Services Commission established a Regulatory Sandbox to facilitate testing of emerging technologies and one participant has tested its mobile wallet. The technology worked for the limited volume of transactions tested and the Bank anticipates that the seamless use of this class of emerging technologies could ultimately reduce the use of cash.

With the dynamic nature of the payments market, the Central Bank is in the process of developing payments legislation and regulatory frameworks to govern payment systems in order to ensure its continued development, soundness and efficiency. The Bank continues to monitor global developments related to the exploration of central bank digital currencies.

Taken from the 2018 Financial Stability Report.