The bankers association has completed three projects aimed at improving efficiency in the banking sector. The projects involved upgrading the Automated Clearing House system. Banks use the ACH system to transfer funds electronically, verify and settle cheques, carry out direct debit instructions, and to transmit cheques.
The electronic system was introduced into banking industry in 1997 and is jointly run by the Kenya Bankers Association and the Central Bank of Kenya.
In order to reduce the time taken to electronically transfer funds, clear cheques, increase liquidity in the banking industry, and enhance security, the banker’s lobby group and CBK invested in modernising the Automated Clearing House system.
In the newly upgraded system, banks will perform direct debit instructions in a centralised manner. A statement issued by the bankers association said, “With the upgrade, mandates for the entire industry will be centrally managed via ACH…”
The move is expected to provide more accurate mandates, reduce the processing time and enhance security of funds. Automated direct debits will see more bank customers and service providers sign up for the service and hence increased business for banks.
The other enhancement to the ACH system is the inclusion of remitter information in all payments. This will reduce cases of fraud and disputed transactions. Additionally, banks will spend less time getting details of the remitter of funds and therefore increase efficiency.
Lastly, banks will take less days to clear cheques under the new system. Ordinarily, banks take one day to clear local currency cheques and up to seven working days to clear foreign currency cheques. The upgraded system will only take two working days to clear foreign currency cheques a good move for bank clients.
KBA took time to test the new system before introducing it to the banking industry. According to its chief executive Habil Olaka, banks have “received positive feedback form their customers” on the new system.