Payment Systems

A national payments system comprises a set of payment instruments, procedures and rules whereby funds are transferred among participants to facilitate the circulation of money within the country and internationally. The participants are banks (including the Central Bank) and other financial institutions which settle payments among themselves, both on behalf of customers and on their own behalf. A national payments system is therefore a core component of the broader financial system and could be viewed as the infrastructure that provides the economy with the channels for processing domestic and international payments resulting from financial transactions that take place on a daily basis.

A payment system is simply an arrangement that facilitates the transfer of ‘money’ from one user to another. In modern payments systems, with the exception of cash, arrangements are made for the transfer of money, to be done electronically in order to ensure speed and efficiency of the payment process and more importantly to eliminate or minimize the risk associated with other payment mechanisms.

Typically, the National Payments System of a country is comprised of:

  1. Large Value Payment Systems (LVPS) that allow large amounts of money to be moved between system participants, especially the commercial banks; and
  2. One or more retail systems that are used to facilitate settlement of small value payments mainly on behalf of small businesses and individuals.

In 2005, the Central Bank embarked on a comprehensive plan to modernize the payments and settlement infrastructure to bring our systems in line with international best practice in terms of their design, operation and legal underpinnings. The goals of the reform are to strengthen the legal framework for the payment and settlement systems, reduce inefficiencies and remove potentially serious systemic risks.

The Bank of Jamaica established a National Payments Council, in 2005, which was charged with the task of modernizing the payments and settlement infrastructure in Jamaica in keeping with international standards and best practices. This was in keeping with the assessment of the IMF/World Bank team which recommended that the settlement infrastructure in Jamaica be modernized to accommodate:

  1. A Realtime Gross Settlement System
  2. A Central Securities Depository and
  3. The appropriate legal framework to support the payment systems.

The international benchmarks for guiding initiatives to improve the safety and efficiency in the design and operations of payment systems published by the Bank of International Settlement are called the core principles for systemically important payment systems and security settlement systems CPSS and CPSS/IOSCO.
Bank of Jamaica has implemented a modern electronic payments and settlement infrastructure which operates in full compliance with international standards of safety, security and reliability. This new infrastructure is comprised of:

  1. a Real time Gross Settlement (RTGS) system that facilitates immediate settlement of payment transfers;
  2. a Central Securities Depository(CSD) for housing domestic issues of BOJ and GOJ instruments;
  3. Electronic interfaces between the RTGS and the CSD, as well as a private network to guarantee communication with the JamClear systems; and
  4. The legal and regulatory provisions to support and protect the stability of the financial systems.

This settlement infrastructure was branded JamClear, which connotes, settlement assured in real time, with JamClear-RTGS being the real time gross settlement system and JamClear-CSD being the central securities depository.

JamClear-RTGS was implemented in February 2009 effectively replacing the Customer Inquiry and Funds Transfer System (CIFTS), the Large value Transfer System. With the introduction of JamClear-RTGS, commercial banks, primary dealers and other financial institutions are now able to transfer funds between themselves, for own account or on behalf of clients, in real time on a safe, secure basis.

JamClear RTGS Rules

JamClear-CSD was implemented on 15 May 2009, replacing the paper based issue of Government of Jamaica and Bank of Jamaica fixed income securities. With the introduction of JamClear-CSD, all new issues of BOJ and GOJ securities are dematerialized to eliminate the need for paper certificates. The electronic system provides the authentic record of ownership of BOJ and GOJ securities. It brings significant efficiencies to the processes for issue, management and redemption to the domestic fixed-income securities market.

JamClear CSD Rules

The three main payments and settlement systems in operation locally:

  1. The Central Bank-Owned and operated Real Time Gross Settlement (RTGS) System, branded JamClear-RTGS.
  2. The Central Bank- Owned and Operated Central Securities Depository, Branded JamClear-CSD and
  3. The Automated Clearing House (ACH), which is owned and operated by the local commercial banks.

During 2010 the Bank of Jamaica (BOJ) made significant progress under the National Payments System Reform Programme. Accomplishments during the year include the passing of two critical pieces of legislation, namely the Government Securities Dematerialization Act (GSDA) 2010 and the Payments Clearing and Settlement Act (PCSA) 2010, which signaled the conclusion of Phase 1 of the reform programme. 

The Government Securities Dematerialization Act (GSDA) 2010 was passed by Parliament in February 2010 and effectively positioned the BOJ as the Registrar for electronic fixed income securities. The Payments Clearing and Settlement Act (PCSA) 2010, was passed by Parliament in December 2010 and gives the Bank of Jamaica the legislative tools that are required to support proper oversight of the National Payments System.

This Oversight function will enable the Bank to ensure that operating payment systems and their participants comply with the core principles and defined operating rules, thereby minimizing any systemic risks that may arise and also to monitor systems efficiency that is essential to the smooth functioning of the financial markets and the economy as a whole.

JCBA Automated Clearing House Rules (Section A- Paper Items)
JCBA Automated Clearing House Electronic Rules
JCBA Automated Clearing House Exchange File Specifications

Government Securities Dematerialization Act, 2010
Payment Clearing and Settlement Act , 2010

Bank of Jamaica FinTech Regulatory Sandbox Guidelines
Application Requirements for the Sandbox
Application Form for Regulatory Sandbox
Regulatory Sandbox Fit and Proper Questionnaire

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