Six local retail banks that partnered to create automated clearing house services in Cayman two years ago, have announced a new system for the clearing of cheques.
The new Cheque Image Exchange product will modernise the local cheque-clearing process and lead to reduced hold periods on local interbank cheque clearance, the banks said in a press release.
The service involves the settling of interbank cheque transactions in both Cayman Islands dollars and US dollars drawn against local banks.
Fidelity, Cayman National, CIBC FirstCaribbean, RBC Royal Bank, Butterfield and Scotiabank, which formed Prism (Cayman) Limited to manage the Cayman Islands Automated Clearing House network, said the Cheque Image Exchange project is expected to be launched in late 2020.
The project builds on the first phase of the automated clearing house which has enabled same-day and immediately available local electronic payments between the participating banks since April 2018.
The fees and lengthy delays in the processing of cheques between customers of different banks have long been criticised by consumers and lawmakers.
Last year opposition politicians condemned the practice of charging non-customers for cashing cheques, prompting Financial Services Minister Tara Rivers to explain that it is neither against the law nor unique to Cayman.
Retail banks charge up to $3 for cheque cashing and up to $5 for local cheque deposits, depending on the bank and the type of account. However, several banks do not charge a fee at all.
Local bank drafts cost between $5 and $10, depending on the bank. Drafts are prepaid and guaranteed by the bank, whereas cheques are created by an account holder and drawn against a bank account. Unlike cheques, drafts cannot bounce and are faster to process.
The cheque-clearing project will help speed up the exchange of cheque information between banks to ensure that the cheque issuer has sufficient funds in the account.
Because currently the cheques have to be physically transported between the participating banks, under the new system customers will have faster access to funds.
The service will also improve the response time to customer inquiries and enable quicker notification of returned cheques.