The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Central Bank has abandoned its original target of eliminating paper cheque use by year-end 2024 because “a compelling fraction” of Bahamians need more time to adjust, its governor affirmed yesterday.

John Rolle, in a brief statement responding to Tribune Business questions, after the banking regulator disclosed the initial timeline has been “deferred” and will now be “reassessed” in 2026, explained that the change had resulted from feedback provided by the public and businesses.

“We will share more details in our various surveys that provided public feedback soon,” Mr Rolle told this newspaper. “However, there was a compelling fraction of the public who wanted more time to transition away from cheques. The Central Bank and financial institutions will provide more details on what the interim milestones are that are being targeted for progress on payments system developments.”

The Central Bank, in a release on the issue, said the deadline shift resulted from a “consensus” among members of the Steering Committee appointed to oversee the transition away from cheques that more time is needed to ready and educate Bahamians. The delay will also give Bahamian commercial banks and other financial providers more time to better roll-out the digital payments infrastructure that will replace cheques as a means of settling transactions.

“After extensive stakeholder consultation, the Central Bank of The Bahamas has agreed with commercial banks and other stakeholders on a reassessment of priorities regarding use of cheques in The Bahamas, while accelerating modernisation of the digital payments infrastructure,” the regulator’s statement said.

“Based on wide stakeholder feedback obtained by the Steering Committee, consensus has emerged to adjust the medium-term strategic mandate for use of cheques. Specifically, the timeline to effect the policy for use of cheques will be deferred from the original target date of December 2024.

“A reassessment of progress in the payments system, and the policy for use of cheques, will be made in 2026. In the interim, milestones are being identified to strengthen universal access to enhanced efficiency in payments across all deposit taking institutions and payment services providers, including use of the Sand Dollar [Central Bank-backed digital Bahamian dollar].”

Some $4.3bn worth of cheque payments were processed in 2022, although the volume of such transactions fell by almost 12 percent. “Cheque usage remained low, except for large value transactions. In particular, the number of processed cheques declined by an annualised 11.9 percent to 1.1m, albeit the corresponding value rose by 1.1 percent to $4.3bn,” the Central Bank said in its 2022 annual report.

Gowon Bowe, Fidelity Bank (Bahamas) chief executive, yesterday confirmed to Tribune Business that the commercial banks and other industries represented on the Steering Committee were in favour of the 2024 year-end “deferral” to make sure “we are not putting the cart before the horse” and moving faster than Bahamians are ready to go in eliminating cheque use.

Noting that the Steering Committee had already obtained feedback from consumers and businesses, following its February 2023 appointment, Mr Bowe said it had sought to determine the country’s “readiness” for cheque elimination and “if it was something nationally that was gaining sufficient consensus.

“What the Central Bank and Steering Committee ultimately decided is that 2024 was too short a period of time, and more analysis was necessary,” the Fidelity Bank (Bahamas) chief added. “It highlighted the need to put the infrastructure in place for alternatives and the cost.”

Besides implementing a digital payments network that Bahamians and businesses have confidence in, especially when it comes to reliability and the speed/finality at which transactions are concluded, Mr Bowe said they also needed reassurance that cheque alternatives will not be more expensive prior to their elimination.

Pointing out that cheque usage is not free, given that such payments attract Stamp Duty, along with printing and monthly maintenance costs, he added: “Wire transfers need to be comparably priced to say to persons watching their costs that it makes sense for them to move away from cheques to the digital platform.

“What’s intended is that, from an analysis perspective, we are not putting the cart before the horse, for want of a better expression, if the alternatives are not reliable, cost comparable and consumers are well-educated. We have to get that right. The focus is to get that right, and then come back with an actual cheque policy....

“The best way to describe it is let’s make sure the facilities are in place to provide a viable alternative so as people move to reduced use and elimination they don’t feel oppressed by not having solutions that work.” The Fidelity Bank (Bahamas) chief executive added that it was also vital to ensure commerce is not disrupted, and that no person or group is disadvantaged, by the move to reduce cheque usage as a means of payment and, ultimately, eliminate it.

“I’m one that stands by cheques really being an extinct instrument,” Mr Bowe told Tribune Business, “and that we should be using digital platforms because it’s certainly faster. Clearance time for cheques can be anywhere up to two days, whereas to clear through the ACH (Automated Clearing House) can happen the same day and certainly within 24 hours.

“The fraud level is much lower with digital payments because you are putting in your PIN, identification number, whereas with a cheque you’re susceptible to someone copying the signature, stealing the images. Ultimately, the cost of processing and clearing cheques is very labour intensive. With automation you get money faster and there is less risk of fraud.

“As long as the infrastructure supports it, and with the right education, people will naturally migrate across from using old paper forms of commerce.” The Central Bank’s move was yesterday welcomed by private sector representatives who had previously voiced scepticism about the need to eliminate cheque use, instead arguing that The Bahamas simply needed to follow the US lead and digitise this payment form.

Ethric Bowe, an engineer with multiple business interests including Advanced Technical Enterprises, an insurance agency/brokerage and a family farm, told Tribune Business “there was no purpose” to the year-end 2024 elimination target and the Central Bank should drop the idea “period”.

“That’s a good decision,” he added. “All they need to do is digitise the cheques. The same information you have on the cheque is the same information that you have on the debit and credit card. It doesn’t make sense.” eChecks have been a feature of the US financial system for several years, and Mr Bowe previously added: “Instead of moving away from cheques, they’re getting deeper into them. I think it’s [their elimination in The Bahamas] a bad plan.”

The Central Bank in its statement, said the Steering Committee’s mandate involves deciding the “appropriate policy for use of cheques in The Bahamas and the development of strategies to efficiently achieve the policy determined, including an effective public education campaign.

“This work is advancing steadily, focusing on initiatives to improve the ease of banking and extend the reach of digital payments alternatives. It is also addressing the format of deeper engagement with the business community around the cost-benefit analysis of domestic payment instruments, while adequately capturing and responding to concerns related to payments,” it added.

“The initiative to modernise payments systems remains focused on outcomes that improve financial inclusion, and provides all users with safe, secure and legitimate access to the digital alternatives. In addition to improving the infrastructure for, and access to, digital payments, the Central Bank will continue to work alongside the Steering Committee to formulate and execute a targeted public education and awareness campaign.

“The Central Bank will also consider amendments to its regulations to increase transparency and facilitate greater enforcement of consumer protection standards in services related to issuance and processing of cheques.”

The Steering Committee is co-chaired by Mr Rolle and the Clearing Banks Association (CBA) chair. Its membership includes the Ministry of Finance, members of the CBA, the Bahamas Cooperative Union League, the Bahamas Insurance Association and the Bahamas Chamber of Commerce and Employers Confederation (BCCEC).

The Business Matters working group, established under the Steering Committee, also includes representatives from the Bahamas Real Estate Association (BREA), the Bahamas Institute of Chartered Accountants (BICA), Civil Society Bahamas, the Bahamas Bar Association and the Office of the Financial Services Ombudsman.