The Central Bank of Kenya (CBK) is pushing commercial lenders and microfinanciers to adopt an upgraded new global payment system.
The new transaction management platform will allow businesses and individuals to better track their funds in real time and use fewer paper checks.
The system, which has expanded capabilities to enable new services, improved efficiency and reduce costs, goes live globally starting next month.
It is backed by the Swift international payment network - a global messaging system connecting thousands of financial institutions around the world.
Most cross-border payments today reach end beneficiaries within minutes with full transparency and confirmation when the payment reaches its final destination.
This happens across Swift’s network connecting more than 11,000 institutions and four billion accounts across 200 countries worldwide.
The new system is expected to lower these timelines, according to Swift and CBK.
Presently an Automated Clearing House (ACH) facilitates the exchange of cheques and electronic funds transfers between bank customers in Kenya.
Participation in the clearing house is open to commercial banks and microfinance banks that are licensed under the Kenyan Banking Act.
“In line with global trends, CBK is supporting efforts by the Kenya Bankers Association and other ACH stakeholders to upgrade its clearing operations to the International Organisation for Standardisation (ISO) 20022 messaging standards,” said the CBK. “The upgrade will enable customers to enjoy significant benefits such as increased efficiency arising from Straight-through-Processing of transactions, the inclusion of more payment information in payment transactions, and interoperability with other systems that are ISO 20022 compliant.”
This means financial institutions will be forced to upgrade the new system at a cost ahead of the November deadline.
Some of the new features of the new payment system besides cost include upfront validation of beneficiary details and accommodation of lower-value payments, says Belgium-based Swift.
The rollout comes amid calls for Kenya and other African countries to adopt cheaper homegrown alternative payment systems.
For instance, a new payments platform backed by the Africa Export-Import Bank (Afreximbank), the continent’s trade finance institution, is now tipped to cut the time it takes to conclude cross-border payments from up to 14 days to 120 seconds.
Called the Pan-African Payment and Settlement System, the system has been commercially rolled out after a yearlong pilot in six West African countries under the West Africa Monetary Zone.
It now plans to bring in other central banks in East Africa, including Kenya, to ease trade around the continent following the launch of the African Continent Free Trade Area (AfCFTA).