Barbados, Bahamas pilot instant cross-border payment system

Instant cross-border payments in local currencies have moved from ambition to reality in the Caribbean, with a landmark pilot between Barbados and The Bahamas demonstrating the viability of a system that could revolutionise regional trade and financial independence, Central Bank of Barbados Governor Dr Kevin Greenidge has revealed.

The CARICOM Payment and Settlement System (CAPSS), which is backed by Caribbean Community central banks to ensure stability and security, is aimed at reducing reliance on foreign exchange and the need for intermediary currencies like the US dollar.

CAPSS, which is based on the model of the Pan-African Payment and Settlement System (PAPSS) that eliminates the need to convert to a common currency like the US dollar, was demonstrated in a proof-of-concept with the central banks of The Bahamas and Barbados.

Dr Greenidge disclosed on Wednesday that Bridgetown and Nassau were able to seamlessly complete business transactions involving buyers of products from each other, using their respective local currencies and being paid instantly.

“We were able to do a true transaction with a buyer from Barbados and a buyer from Bahamas, buying an item with Bds$100 from a buyer in The Bahamas and the buyer in The Bahamas buying an item from Barbados with Bah$90. The payments were made instantly and seamlessly,” Dr Greenidge told Barbados TODAY.

“We were able to test the robustness of the system, and it was successful,” he said, adding that it was easy because both countries have fixed exchange currency rates.

He said CARICOM central bank governors have agreed to further test the robustness of the CAPSS by expanding the pilot project to at least two other Caribbean participating central banks.

Dr Greenidge said a final decision is still to be made by the governors as to which countries will be involved in the expanded pilot.

The system allows for instant, real-time cross-border payments, meaning transactions can be completed almost immediately.

CAPSS is expected to improve regional trade by reducing the cost and complexity of cross-border payments and increasing financial independence in the region.

The latest annual report of the central bank said that in June last year, it engaged in supervisory colleges with regional and international regulators, aiding in the effective cross-border supervision of Canadian banking groups.

It said that this collaboration facilitated better oversight and understanding of transnational banking operations, strengthening financial stability across borders.

The bank said it also played a key role in the CARICOM Technical Working Group on intra-regional payments.

It reported that this group, comprising the Technical Committee and Regulatory and Governance Committee, is tasked with establishing the technical specifications and outlining the necessary regulatory, policy, and governance structures for the successful operation and expansion of the CAPSS. (EJ)