National Payment System
A National Payment 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 payment 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 payment 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 minimise the risk associated with other payment mechanisms.
Bank of Jamaica’s oversight authority for the National Payment System is established in:
- Section 27 of the Bank of Jamaica Act 1960 (amended 2010), which states:
- “(2) In order to ensure overall stability of the financial system, the Bank shall exercise powers over the national payment system, including securities settlement systems, for the purpose of preventing or controlling systemic risk.
- (3) In exercise of its oversight powers, the Bank shall have power to issue directions to individual systems or participants, as well as general or individual standards and guidelines, to undertake all necessary audit and inspections and to impose penalties for breaches of the applicable laws and regulations.”
- Section 3(1) of the Payment Clearing and Settlement Act, (PCSA) 2010 states:
- “the Bank is charged with responsibility for the regulation, supervision and monitoring of clearing and settlement systems.”
The Financial Market Infrastructures that operate in Jamaica’s National Payment System include:
- The JamClear®-Real Time Gross Settlement System (JamClear®-RTGS): JamClear®–RTGS
was implemented in February 2009. It processes large value (amounts ≥ J$1
million) and time critical payments by financial market participants on accounts
held at BOJ. JamClear®–RTGS is owned and operated by BOJ in real time.
Participants in the JamClear®–RTGS include: DTIs (commercial banks, merchant
banks and building societies), primary dealers, Accountant General’s
Department, Jamaica Central Securities Depository and BOJ. Payments
settled in the JamClear® – RTGS are final and irrevocable.
- The JamClear®-Central Securities Depositories (JamClear®-CSD): JamClear®-CSD commenced operations in May 2009. The electronic central securities depository system provides an authentic record of ownership of BOJ and GOJ domestic securities. It also offers a wide range of depository functions and settlement of funds through JamClear®-RTGS. The depository functions include; the registration and settlement of auction results from the primary market; sales and purchases; exchange of custodian; registration, cancellation, and execution of pledges; registration, management, and execution of repurchase and reverse repurchase agreements; payment of interest and coupons, registration and payment of partial and full security redemptions. The depository will provide for the execution of foreign exchange trades.
- Automated Clearing House (ACH): The ACH commenced operations in October 2002. It is a systemically important retail payment system that facilitates the clearing and settlement of cheques, direct debits and credits on a deferred net settlement basis. The ACH infrastructure is owned and operated by Automated Payments Limited (APL), with the operations being executed by J.E.T.S. Limited under a management contract.
Retail Payments Jamaica Limited is the oversight body for ACH operations and is chaired by BOJ. BOJ also functions as the Supervisor for the manual clearing process for items that do not qualify for the ACH, as well as foreign currency cheques, which qualify for domestic clearing.
- MultiLink: The MultiLink system, which commenced operations in June 1997, is owned and operated by commercial banks and selected deposit taking institutions. This is a shared electronic network allowing customers to transact payments at ABM or Point of Sale against their own bank account.
- Quality Network (QNET): QNET was incorporated in 2005 to provide shared technology services to the Credit Unions of Jamaica. The full service technology centre provides other financial institutions with efficient and cost effective Hosting solutions, ATM & Debit Card services (JCCUL EASI ACCESS Brand), Disaster Recovery & Business Continuity Solutions and Professional Services.
- Payment Service Providers (PSPs): PSPs are body corporates that are authorised by the Bank to provide electronic retail payment instruments and services to customers and businesses, for the purpose of effecting payments and funds transfers.
- JamClear®-FXTP: The JamClear®-Foreign Exchange Trading Platform (JamClear®-FXTP): JamClear®-FXTP commenced operations 1 June 2020. The platform provides real time electronic FX trading initially for the USD/JMD currency pair and observation of trades between authorised FX traders. JamClear®-FXTP is owned and operated by the BOJ. The FXTP will include Deposit Taking Institutions (DTI’s), cambios and large corporate clients as observers with final settlement of trades in JamClear®-RTGS.
During 2010, the Bank of Jamaica (BOJ) made significant progress under the National Payment 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 Payment Clearing and Settlement Act (PCSA) 2010, which signalled 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 Payment 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 Payment System.
This Oversight function enables the Bank to ensure that operating Financial Market Infrastructures and their participants comply with the Principles for Financial Market Infrastructures and defined operating rules, thereby minimising any systemic risks that may arise. In addition, the oversight function also facilitates the monitoring of systems efficiency that is essential to the smooth functioning of the financial markets and the economy as a whole.