Electronic cheques to help banks extend working hours

By James Anyanzwa

Commercial banks customers are likely to benefit from extended banking hours following the automation of the cheque processing procedure scheduled for next month.

Kenya Bankers Association (KBA) Chief Executive Habil Olaka told The Standard on Thursday that thanks to the new system, commercial banks have the capacity to extend the banking hours.

Mr Olaka, however, said the amount of additional time would vary across different banks depending on the type of truncation models adopted.

Commercial banks have been given the leeway to choose from a number of truncation models whose first point of truncation delivers maximum benefit.

automated processing

These include centralised processing, decentralised at branch back office, decentralised at teller level, hybrid or bureau system.

Olaka said automated cheque processing would result into an extended cut off time for cheque submission.

Central Bank of Kenya in collaboration with commercial banks have adopted a cheque truncation project, which seeks to replace the physical movement of cheques with electronic information.

With the new system, commercial banks will switch to a single national cheque clearing cycle of three days for both upcountry and Nairobi cheques starting from June 1.

Six months later, the cheque clearing cycle in the whole country will reduce to two days.

Currently, the longest cheque clearing period for upcountry cheques is fixed at 10 days.

The five-year cheque truncation project is under the management of PriceWaterhouseCoopers (PWC), with commercial banks financing the cost of the investment to the tune of Sh650 million.

Modernisation of the clearance house is expected to come with certain efficiency levels such as use of only images in an electronic clearance platform, thereby saving on transportation cost of moving paper cheques.

KBA has introduced new cheques whose design complies with the security and operational requirements of the new system.

The banks have started replacing old cheques with new cheque truncation system compliant cheques.

All current cheques would, however, remain acceptable until May 31 when they will be phased out.

Cheque truncation refers to a process in which physical cheques presented for payment in a bank are converted to electronic form.

The image is transmitted electronically to the clearing house for processing and eventual payment by the paying bank.

The new system is expected to improve efficiency and streamline cheque-clearing process, reduce costs associated with handling of physical cheques and curb the increasing cases of cheque fraud.