More cash was in circulation and fewer Barbadians were swiping their credit and debit cards last year as the country experienced several shutdowns due to the COVID-19 pandemic.
At the same time, the 2020 Financial Stability Report, which was released on Thursday, also showed that electronic payments by government increased as the Mia Mottley administration continued its efforts to eliminate paper-based transactions.
According to the report, after five years of steady growth, point of sale (POS) payments and automated Teller Machine (ATM) transactions contracted moderately during 2020.
“The value of POS and ATM transactions fell by 2.3 per cent and 12.5 per cent, respectively. These declines were driven by the national shutdown and layoffs which curbed consumer demand,” said the report.
Domestic credit card transactions declined by 12.6 per cent or $92.8 million last year. The report said the fall-off was registered in both the personal and business sectors, with individual consumers accounting for $84.4 million of the decline and business transactions $8.4 million.
Debit card transactions (POS and ATM transactions) totalled around $1.2 billion in 2020, while credit card transactions reached just over $600 million.
At the same time, currency in circulation increased by 7.4 per cent during 2020 to reach around $900 million, accounting for 10.6 per cent of gross domestic product.
“This outturn was driven by increased cash holdings in financial institutions to meet liquidity needs and to service the higher demand for cash by customers during the pandemic,” it said.
The financial stability report noted that the coronavirus pandemic underscored the importance of having safe and efficient electronic clearing and settlement systems.
It noted: “With the increased demand for contactless payments to reduce the likelihood of virus transmission, government, businesses and consumers relied heavily on electronic payments to facilitate their operations and transactional needs.”
Therefore, the report noted, the Real Time Gross Settlement (RTGS) system, which processes large-value and time-sensitive payments between the domestic banking system and the Central Bank and the Barbados Automated Clearing House Services Inc. (BACHSI), which facilitates the clearing of cheques, direct payments and daily inter-bank settlements, allowed for effective and robust transaction activity in the financial system.
For last year, the volume and value of transactions processed through the RTGS system increased by 36.4 per cent and 26.6 per cent, respectively.
“These gains were largely due to transactions related to land tax and other payments by Government which may have otherwise been facilitated via cheque or cash prior to COVID-19. Consequently, the average value per RTGS transaction fell by 7.2 per cent
The report noted that overall payments processed in the domestic market for 2020 increased by 2.8 per cent when compared to 2019.
“This growth was driven by electronic payments through the RTGS system but direct payment through the BACHSI system also rose. At the same time, with depressed economic activity, customer-focused electronic transactions, namely debit card, point of sale and credit card transactions, as well as cheque-based payments declined over the year. The value of automated teller machine transactions contracted, but currency-in circulation was boosted by financial institutions holding more cash on hand,” the report explained.
The value of transactions processed through the BACHSI system fell by 10.5 per cent for 2020. Meanwhile, cheque payments fell by $4 billion, as Government continued its multi-year effort to reduce paper-based transactions.
“Therefore, the National Insurance Scheme increased direct lodgements to facilitate easier access to benefit payments. Consequently, the value of direct payments grew by $2.1 billion to account for 33.9 per cent of total payments through the BACHSI system in 2020, compared to 19.2 per cent one year earlier,” it said.