By John Njiraini
Customers of commercial banks will from next month have their cheques cleared within two hours instead of the traditional four days, as banks move towards full adoption of electronic payment system.
This follows the introduction of value capping that means cheques worth less than Sh1 million would be processed much faster while those exceeding Sh1 million would no longer be accepted.
Instead, customers carrying out transactions worth Sh1 million and above would have to make use of the Real Time Gross Settlement (RTGS) electronic clearing system starting October 1.
"This is a revolutionary process that will make payment secure, efficient, reliable and safe," said Stephen Mwaura, head of payments systems at the Central Bank of Kenya (CBK).
Reduce fraud
Putting a lid on the amount of money that can be transacted using cheques would enable for faster clearing — a move that could prove beneficial to retail customer and people in the small and medium enterprises sector.
Besides increasing the level of liquidity among banks, the move is also expected to significantly reduce the high rate of fraud associated with cheques.
"We want to reduce risks and make it convenient for customers to access value service faster," said John Wanyela, chief executive of the Kenya Bankers Association.
Through the RTGS, customers dealing with large sums of money would only be required to instruct their banks to make payments to a receiving banks and the transaction would be effected electronically, within four hours.
This process would either be carried out by customers visiting their banks or making use of the online banking facilities.
CBK would not only be monitoring all transactions but would also be carrying out regular reviews to guarantee smooth usage.
Though the uptake of RTGS is still in its infancy stage, a total of Sh60 billion passes through the system daily mainly transactions by commercial banks.
The amount, however, constitute about 50 per cent in terms of value, while the world target of transactions being undertaken through RTGS is 80 per cent.
Statistics by the CBK estimate that 20,000 money transfer transactions occur across Kenya’s existing financial infrastructure every day.
Electronic Payment
By adopting electronic clearing system, it joins countries like Uganda, Tanzania, and South Africa among others that are already using it.
The move forms part of the modernisation of the country’s payment system that started in 2005 after drafting of the Kenya Electronic Payment and Settlement System Rules and Procedures.
