Customers to get faster clearance for cheques after system upgrade
FACILITY: Lenders will access faster clearing services for cheques, direct debits and electronic funds transfer following an upgrade of the Automated Clearing House (ACH) which facilitates the transfer of payments.
The new standards are expected to facilitate a reduction in processing errors and improve turnaround times in electronic funds transfers.
This is after the banking industry in Kenya moved to adopt a fully international standard that enables global interoperability by integration with any payment system in the world.
While announcing the system upgrade to ISO 20022 standards yesterday, Kenya Bankers Association (KBA) said foreign currency cheques that previously took a seven-work day cycle will be reduced by five days to T+2 or two days after the cheque is presented in the ACH.
Local currency cheques clear on a T+1 cycle with value available to the payee one day after the cheque is presented by the paying bank to the ACH. “The new system will significantly improve clearing services for cheques, direct debits and Electronic Funds Transfers in the country. The new standard will also provide enhanced payments insights, supporting banks’ risk management initiatives and informing policy decisions towards promoting a responsive financial sector” said KBA Chief executive Habil Olaka.
Introduced in 1997 through a partnership between KBA and the Central Bank of Kenya (CBK), the ACH system facilitates the exchange and settlement of payment instruments such as cheques and electronic transfers between banks. The automated clearing cycle replaced what was a slow, manual process that was prone to abuse by fraudsters, which established an automated clearing house.
This started a process that enhanced the efficiency of clearing cheques in the country through the Cheque Truncation System (CTS).