Nairobi — Banks will now offer faster clearing services for cheques, direct debits, and electronic funds transfer following an upgrade of the Automated Clearing House (ACH) to the ISO 20022 standard.
ISO 20022 is a global standard for electronic messaging between financial institutions and was initially created to give the financial industry a common platform for sending and receiving data about payments.
The upgrade to the new standard is expected to facilitate a reduction in processing errors, improving turnaround times in Electronic Funds Transfers.
KBA Chief Executive Officer Habil Olaka said the transition is part of efforts by the Association to continuously improve the payments system infrastructure and providing more efficient and robust systems in line with the National Payments System strategy and vision.
"This transition also resonates with the Kenya Bankers Association Strategic Plan for the period 2019 to 2023, which seeks to facilitate access to efficient and affordable financial services through enhanced technological innovation and sector-wide efficiency programs," said Olaka.
The move to the new standard is designed to unlock opportunities for banks and other financial sector players, providing improvements in operational efficiency, enhancing customer experience, better Know Your Customer (KYC) information exchange as well as providing a platform that will enable tighter payments integration and innovative new services.
Introduced in 1997 through a partnership between KBA and Central Bank of Kenya (CBK), the ACH is established to facilitate the exchange and settlement of payment instruments such as cheques and Electronic Funds Transfers between Commercial banks.
Sign up for free AllAfrica Newsletters
Get the latest in African news delivered straight to your inbox
The ISO 20022 upgrade succeeds enhancements conducted on the platform in 2019, centralizing banks' direct debit instructions and automating mandate applications.
It also follows the 2019 inclusion of remitter details on all payment instructions, enabling banks to immediately identify the payment instrument payee or remitter, shortening turnaround times while mitigating disputed transactions and fraud.
Fidelis Muia, KBA Technical Services Director, said the ISO 20022 upgrade is the next milestone, where the banking industry is now adopting a fully international standard, enabling integration into any payments system in the world.
"This brings Kenya to the level of any international standard in terms of payments within the clearing house and other payments streams that will be in future implemented in the Kenya payments system," he said.
Sybrin Kenya Operations Director Joe Kiragu noted that the ISO 20022 standard will offer global interoperability.
"The Kenya ACH will now be able to integrate with any ACH globally and any payments system out there," said Kiragu.
Currently, 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 Automated Clearing House.
Foreign currency cheques previously cleared on a seven-work day cycle, which has now been reduced by five days to T+2 or two days after the cheque is presented in the ACH.
