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Central Bank of Barbados to extend ACH facility to credit unions

The Central Bank of Barbados (CBB) said on September 19 that it intends to facilitate expanded use of its Automated Clearing House (ACH) system to credit unions that wish to do direct debits. 

The Barbados Central Bank (Photo: CBB)

The CBB has been using direct transfers via the Automated Clearing House (ACH) and Real Time Gross Settlement (RTGS) to speed up payments locally.

These, together with online banking within and across banks – complemented by a payments processor who intermediates mainly high volume, low value transactions – are being used to modernize the payments system. 

“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.”

– Central Bank of Barbados

The expansion of the ACH to credit unions, the CBB said is a potentially significant development in the payment system given the growing importance of the credit union segment to the overall financial sector. 

Incorporation of the credit unions in ACH, the central bank said in a release posted on its website, requires the adoption of legislative, infrastructural and administrative changes that are expected to come on-stream during the second half of 2019.

Increased use of credit and debit cards designed to reduce of cash.
(Photo: Business Barbados)

CBB says that it has been encouraging use of online and electronic technology as one way of transforming the payments space but says that the consumer culture needs to change.

Developments including higher usage of credit and debit cards are designed to reduce the use of cash and to improve efficiency in the payments system. 

However, the CBB noted in a release issued on the Bank’s site, “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.”

CBB said credit and debit cards already supplement more traditional cash and cheque payments processes. The developments are designed to reduce the use of cash and to improve efficiency in the payments system. 

The central bank said it was working with financial institutions, and Government to address 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,” said the CBB.

It was also noted that 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,” the CBB said.

 An interesting development noted by the CBB is the emergence of digital wallets for the conduct of financial transactions by non-traditional players. 

The Central Bank and the Financial Services Commission have established a Regulatory Sandbox to facilitate testing of emerging technologies and one participant has tested its mobile wallet. 

The CBB said in its release that 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.”

It also stated that the Bank continues to monitor global developments related to the exploration of central bank digital currencies.