Why can’t we scan cheques with our phones in Jamaica?

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Jamaica is one of the few countries in the Caribbean where persons can't deposit cheques using their phones.

While there have been several advancements by Jamaican banks over the last decade, a question that puzzles many persons is why they can’t simply deposit their cheques to their bank account using their smartphone? This already exists in North America and Europe, so why not in Jamaica?

A cheque is simply an instrument that instructs the bank where the drawer/payor’s account is held to pay the stated sum to the person or entity listed on the cheque. The current process of depositing a cheque involves depositing it to your bank account either in branch or through the automated teller machine (ATM). If the cheque that is being deposited to your account is with the same bank that it was drawn at, then the funds will be available same day or by the next day depending on how and when it was deposited.

However, if the recipient’s bank account is at a different bank from the payor’s bank, then it can take up to three business days for that cheque to be settled and made available for use if it’s a Jamaican dollar (JMD) cheque. This is subject to not only the payor having the funds available in their bank account, but also the cheque being endorsed correctly, legally tendered and signed by the relevant signatories attached to that payor’s account. If any of these steps aren’t meet, then the payor’s bank can refuse to accept the cheque and bounce/dishonour it. Cheques being processed between different banks involves the customer’s bank verifying with the other bank all of the previously mentioned conditions and clearing the funds to allow for it to become available for use. The three-business day settlement period is also impacted by holidays and weekends when banks aren’t usually open and the currency of the cheque as well.

Technology has caught up quite quickly over the last two decades which has enabled remote deposit capture (RDC) to be used by banks in the USA and Europe to allow their retail clients to simply scan the front and back of a cheque and have the funds processed within a couple of hours or days. Even here in the Caribbean, CIBC Caribbean Bank Limited (formerly FirstCaribbean International Bank Limited) has launched its mDeposit feature which allows clients in The Bahamas, St Lucia, Antigua, St Kitts, and Cayman Islands to take a photo, upload and instantly deposit their cheques. That feature also carries a notification monitor of the cheque status and an alert when the deposit is successful. CIBC Caribbean Bank also has operations in Jamaica, but this is not offered to Jamaican clients. What’s the reason?

The Jamaica Observer put these questions to the Bank of Jamaica (BOJ), which pointed to the Bill of Exchange Act (BOEA) that governs cheques. The BOEA has certain rules and conditions under its presentment act that governs the processing of cheques for payments. With respect to cheque encashment, there are certain obligations that must be meet by the person who presents the cheque, the payor, and the bank that it asked to honour the cheque. These obligations include timeliness, proper presentation, business hours, correct documentation and location.

The timeliness of a cheque which speaks to a specific period for the cheque to be presented and processed before it becomes ‘stale’ which is when banks usually no longer honour those cheques. Cheques are usually considered stale-dated if six months have passed since the date on the cheque.

The proper presentation of the cheque by the ‘payor’ or their representative which speaks to it being delivered to the drawee/recipient’s bank. The business hours element speaks to when the cheque is presented during the bank’s business hours with any cheque presented outside of those hours not being processed until the next business day.

The correct documentation refers to the cheque having all the necessary endorsements and being filled out correctly with no alterations that would invalidate it. In some instances, the location element might define the branch or location where the cheque must be presented for encashment.

“Therefore, failure to meet the conditions set out in the presentment provision could result in the cheque not being honoured, leading to its return to the payee. In that regard, any intended deviation from those provisions will require amendment to said Act. Furthermore, part of the bank’s agenda to modernise the banking sector includes undertaking initiatives that will support greater payment system efficiency to facilitate improvements in the delivery of payment services through continued innovation. In this regard, reviews of legislation and rules impacting cheques may be considered part of the agenda to support greater efficiency of the payment system,” the BOJ responded in an e-mail to the Business Observer .

CIBC Caribbeans’s Chief Information Officer Esan Peters noted in the company’s March annual general meeting (AGM) that the defining feature which allows for its mDeposit feature to exist in other markets is legislation allowing for full truncation and exchange of images between banks. Even in the USA, the Cheque 21 Act was brought into law to allow for scanned cheques to have the same legal standing as the original paper documents.

So, even if legislative amendments were to happen tomorrow, would there be a need for certain standardised features to allow for this option to become available in Jamaica? If someone tries to do a mobile deposit on their phone in the USA, they will see certain things such as the cheque number in a particular place and the date in particular spots on the front of the cheque while the back of the cheque has a standard area for it to be endorsed or signed by the recipient of the cheque. This standardisation factor ensures that there are no issues for cheques being scanned by users of different banks.

Cheque issuance has been on an accelerated downward trend due to the COVID-19 pandemic. The total number of cheques issued fell six per cent to 12.48 million units in 2019 with the value slightly decreasing from $1.71 trillion in 2018 to $1.69 trillion in 2019. However, according to the BOJ’s payment system data bulletin, the number of cheques issued in 2023 fell 16 per cent to 5.55 million units with the value of cheques processed declining a tenth from $1.09 trillion in 2022 to $974.54 billion in 2023. The first two months of 2024 saw cheques issued fall 13 per cent to 830,000 units with the value processing decreasing eight per cent to $150.84 billion.

Manually processed United States dollar (USD) cheques have fallen from 149,510 units in 2018 with a value of US$2.23 billion to 85,490 units in 2023 with a value of US$1.37 billion. It should be noted that while the number of cheques processed fell nine per cent between 2022 to 2023, the value processed was relatively unchanged year on year.

A move to allow the scanning of cheques could help clear up some of the waiting times in banks and help more persons to access their money. This would be of significant value to numerous investors on the Jamaica Stock Exchange (JSE) as there are many persons who haven’t heard about or don’t know about dividend mandates which allows for registrars to remit dividends to their bank accounts. When some people receive literal cents on a cheque, many people forget about those cheques and result in them becoming stale-dated. If persons could simply scan those cheques in the absence of a dividend mandate, the millions currently held on company’s balance sheet as payables could be freed up to investors before companies consider reclaiming those dividends after 12 years.

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