Real-time bank transfer payments reach Sh26 trillion

Money Markets

Payments made through Kenya’s real-time bank transfers rose by a tenth last year, indicating rising public awareness and uptake of a system introduced to ease business transactions. PHOTO | FILE 

By DAVID HERBLING

In Summary

• Kenya Electronic Payment and Settlement System handled Sh25.6 trillion in the year 2014 compared to Sh22.7 trillion previous year.
• KEPSS platform has interconnected Kenya’s 41 local commercial banks out of the total 44 to offer real time funds transfers, helping CBK reduce spending on currency printing.
• Official data shows that KEPSS last year settled an average of Sh100 billion daily and cleared about 10,000 transactions per day.

Payments made through Kenya’s real-time bank transfers rose by a tenth last year, indicating rising public awareness and uptake of a system introduced to ease business transactions.

Kenya Electronic Payment and Settlement System (KEPSS) handled Sh25.6 trillion in the year 2014 compared to Sh22.7 trillion previous year, latest Central Bank of Kenya (CBK) data shows.

KEPSS runs the real-time gross settlement (RTGS) system hosted by the Central Bank that went live in July 2005 as a strategy to help businesses cut the cost of handling cash and curb incidence of fraud involving high-value cheques.

“It is a very secure payment system that delivers financial settlements in real time. These figures in themselves tell the story of success and so more enhancement will provide the platform for more success,” said Central Bank of Kenya governor Njuguna Ndung’u.

The KEPSS platform has interconnected Kenya’s 41 local commercial banks out of the total 44 to offer real time funds transfers, helping CBK reduce spending on currency printing.

Prof Ndung’u said KEPSS uses the Society for Worldwide Interbank Financial Telecommunication as the message carrier, which offers a secure platform that can transact in multiple currencies.

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Official data shows that KEPSS last year settled an average of Sh100 billion daily and cleared about 10,000 transactions per day.

The KEPSS system is also linked to two regional payment systems — the East African Payment System for EAC and the Regional Electronic Payment and Settlement System for Common Market for Eastern and Southern Africa countries. 

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The KEPSS platform sees transactions being settled continuously and in real time in the accounts of the participants at CBK unlike electronic fund transfer (EFT) which takes a day.

EFT operates on a deferred net settlement basis which settles transactions in batches — and settlement is done once daily.

The introduction of KEPSS saw the banking sector regulator outlaw use of cheques to settle deals worth Sh1 million and above— and directing investors to use RTGS for such transactions.

Prof Ndung’u argues that RTGS systems mitigate systemic settlement risk inherent in large-value settlements.

Kenya’s volume of RTGS payments has grown from Sh2.9 trillion in 2005 to Sh25.6 trillion last year — a compounded annual growth rate of 27.3 per cent over the period.