Digital transformation in Nicaragua with checks truncation

On December 14, 2022, the Central Bank of the Republic of Nicaragua (“CBN”) approved Resolution CD-BCN-LXXX-1-22 “Check Truncation Regulation” (hereinafter, the “Regulation”) with the in order to regulate and establish the requirements and procedures that must be met in the process of truncation of bank checks by the participants of the Nicaraguan Interbank System of Electronic Payments (SINPE), as well as regulate the probative value of the images of the check.

The Regulation defines “Check Truncation” as the procedure by which the physical exchange of the check is reduced or eliminated, being replaced in part or in its entirety by electronic records or electronic images of the check processed and transmitted through the payment system, in which the depository participant transmits to the drawee participant the relevant information about it, without it being necessary to send the original physical check that has been truncated to carry out the operation.

Under this initiative, as of August 14, 2023, checks for amounts equal to or less than seventy-five thousand córdobas (C$ 75,000.00) equivalent to approximately two thousand United States dollars (US$ 2,000.00) may be digitally emitted for truncation. This amount will be reviewed by the CBN at least once a year to analyze the need to modify it.

For the proper functioning of these virtual transactions, all the banks of the national financial system must be duly trained with the necessary technology tools for the capture, processing, memorization, filing, transmission, and visualization of check information, to safeguard the security of the transferred amount. Banks will be responsible for verifying the authenticity of the truncated check image.

This digitization process will expedite the payment time for checks issued by one bank and received by another, since with the physical check the term for the accreditation of the funds could take up to 3 days, and for the payment of digital checks it is 1 business day.

The digitization of means of payment is a significant advance for the development of the national financial system. It is important to analyze the process of these digital transformations, their challenges in the process and benefits for both financial institutions and users, to continue developing them in an agile and safe way.