Title: Nicaragua’s Financial System to Modernize Check Usage, Transitioning to Digital
As of August 14th, the national Financial System of Nicaragua will undergo a process of modernization concerning the use of checks. The Central Bank (BCN) has announced that checks will be issued electronically instead of being delivered physically. This move is part of the check truncation process set to start on the specified date.
However, the news has caused confusion on social media platforms, with some mistakenly reporting the disappearance of checks in Nicaragua. Economist Luis Núñez Salmerón clarified that it is not a disappearance but rather a transition from physical to digital checks. Núñez emphasized that as long as checks continue to be used as a payment instrument, similar to email replacing paper mail or interbank transfers, they will still exist.
The BCN explained that check truncation is a procedure that reduces or eliminates the physical exchange of checks, replacing it with electronic records or images transmitted through the payment system. The objective of this transition is to expedite the payment process for checks issued by banks within the national Financial System. The BCN aims to ensure funds are credited on the next business day (T+1).
The first phase of the digitization process will focus on checks for amounts equal to or less than 75,000 córdobas, $2,000 USD, or €2,000. The BCN reserves the right to update this threshold. Checks exceeding these amounts will still be issued physically, with the BCN updating balances accordingly. Therefore, the paper check will continue to be operational during the digitalization process, subject to the updated amounts set by the BCN.
Under this new system, checks subject to truncation will no longer be physically sent by banks to the client who issued them. Instead, customers will have access to the digital image of the truncated checks and their relevant account statements through the online branch of each bank. The legal equivalent of the original check will be the image representation, provided it accurately captures all information from the front and back of the physical check. Each bank must ensure compliance with the image reproduction requirements as established by the BCN for the reproduction to have probative value.
The implementation of check truncation will significantly advance the national payment system in Nicaragua. The digitalization of the check exchange process will reduce check payment times, enabling customers to better manage their resources and liquidity to meet their commercial commitments, as highlighted by the BCN.
Overall, this transition represents a shift towards a more efficient and modernized payment system, aligning with technological advancements in the financial industry.