The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Central Bank’s governor yesterday said cheques cleared via the Bahamian banking system have decreased by 7.5 percent annually over the past decade with businesses, especially, dropping an instrument “very susceptible to fraud”.

John Rolle, responding to Tribune Business questions over the regulator and commercial banking industry’s joint push to eliminate the use of cheques by year-end 2024, asserted that the move is aligned with efforts to “continually upgrade and modernise the payments infrastructure” in The Bahamas.

Pointing out that cheque usage has declined in tandem with the rise in digital and online banking alternatives, he disclosed: “The access to digital alternatives has been the main driver for the reduction in local cheque use. According to data from the ACH (Automated Clearing House), the volume of cheques cleared thorough the inter-bank process has reduced over the last decade by any average yearly rate of 7.5 percent since 2011.

“The value of these instruments fell by 2.3 percent on average each year. Over the same period, volume and value of electronic payments rose at a double digit average annual pace.” While the volume of cheque use has declined by around 50 percent over the five years since 2017, some 1.2m payments - involving a collective $4.2bn sum - were made by this method in 2021 according to the Central Bank’s own annual report.

“Over the review period, cheque usage remained subdued, with the exception of large-value transactions. More specifically, the number of processed cheques declined by 7.6 percent to 1.2m, while the attendant value fell by 6.8 percent to $4.2bn, year-on-year,” the report said.

This represents a steep drop from the near-2.5m cheques written in 2017 and 2018, and the estimated 2.3m passed in 2019, with the big drop-off occurring in 2020 amid the COVID-19 pandemic’s lockdowns and other restrictions which forced Bahamian businesses and consumers to digital banking channels. The number of cheques written in 2020 fell by 35 percent year-over-year to between 1.3m-1.4m, and that decline - albeit at a lower rate - continued in 2021.

“Ensuring the efficiency and effectiveness of the payments system has always been a key mandate of the Central Bank. Cheque elimination is in keeping with the long-term and ongoing strategy of continually upgrading and modernising the payments infrastructure,” Mr Rolle explained yesterday. 

“The Central Bank’s 2020 surveys on business and consumer payments practices reinforce data that the Central Bank is receiving from commercial banks that the use of cheques continue to wane as a routine payment instrument in favour of electronic alternatives. Over 80 percent of consumers indicate that they either don’t have personal cheques at all, or have them but never use them.

“Similarly for business, nearly two-thirds no longer use cheques for salary payments; over 60 percent no longer use cheques for utility bills; and over 40 percent no longer use cheques to pay local suppliers. The Government has been one of the leaders in ceasing to accept most forms of cheques. With the cheque elimination strategy formally in focus, we can better ensure that convenience, financial inclusion and financial access are improved for the digital instruments which replace cheques.”

And, while the Central Bank possesses no data on how often cheques are abused, Mr Rolle confirmed they are especially prone to exploitation by fraudsters while often ‘bouncing’ due to there being insufficient funds in the purchaser’s account. “Currently, the Central Bank does not require commercial banks to report on the number of cheques ‘returned for insufficient funds’ or other deficiencies in the instrument that may prevent settlement,” the governor added.

“However, it is established that cheques are very susceptible to fraud. This explains why acceptance by both businesses and the Bahamian public sector are on the decline. The direct, digital means of making payments allow individuals and businesses to exercise more real-time control over their funds, and to deploy safeguards that better protect themselves from fraud.

“Even here, though, the education of users is important, and this is a critical component of our approach to encourage users to adopt digital payments.” The Central Bank, meanwhile, has issued a revised tender seeking proposals to conduct a public education campaign on check elimination after this newspaper warned language in the original version could be interpreted as seeking to stifle, or muzzle, dissent and opposing voices.

The original version stated: “The parties concerned wish to move ahead with the elimination of this instrument in an effort to improve the efficiency and effectiveness of the domestic payments sector, and to respond to the technological advancement of other payment instruments.

“However, initial anecdotal feedback has indicated a preference by some stakeholders for the retention of the instrument, whether out of nostalgia, fear of change or unfamiliarity with evolving payment technologies. The parties concerned seek to mute these objections and implement a strategy that would facilitate the cheque elimination project with minimal negative public feedback.”

The latter paragraph has now been changed to eliminate the word “mute”. It reads: “However, initial anecdotal feedback has indicated a preference by some stakeholders for the retention of the instrument, whether out of nostalgia, fear of change or unfamiliarity with evolving payment technologies. The parties concerned seek to address these objections and implement a strategy that would facilitate the cheque elimination project with minimal negative public feedback.”

Mr Rolle said of the public education campaign: “To be clear, the RFP has been developed as a means of identifying a public relations firm that would serve to advise the stakeholders on the most effective means of reaching the entire population. The RFP reflected the requirement that the campaign must be both educational and persuasive in addressing the needs and concerns of even those members of the public most hesitant to change.

“This is a public education campaign to address concerns, partial understandings and unease that may on the surface  present themselves as opposition to change. In so doing our intention is to get the public to understand how that payments system, as it is being transformed, will not be geared to disadvantage users.

“Anecdotally, individuals have expressed concerns about the cost of payments transactions, the speed of settlement and reconciliation frustration for payments that conclude through electronic transfers. The Bahamian education campaign will address how the payments system is being transformed to alleviate such concerns,” the governor continued. 

“In addition, it will inform the public of the transformation that has already happened within the ACH to improve the speed, ease and traceability of electronic transfers. Over the summer months, all of the commercial banks are transitioning to the new payments messaging format that has been adopted by the ACH. The format allows for more concise information to be provided on who is transmitting the payment.

“The commercial banks have a separate education campaign that is being developed around this upgrade to encourage users to make more electronic transfers as a substitute for in-person and cheque payments..... The public education campaign to focus on cheques is just beginning. However, it is not taking place in isolation of the overall Bahamas’ strategy of payment system modernisation that addresses efficiency, financial inclusions and financial literacy.”