By Elijah Odhiambo
Banking sector in the country has received a major boost following an upgrade of the Automated Clearing House (ACH) to the ISO 20022 standard, an improvement that will see banks offer faster clearing services for cheques, direct debits, and electronic funds transfer.
With this move, cheques from rival banks will now clear within one day, away from the current state where they take three days.
According to Habil Olaka, Chief Executive Officer of the Kenya Bankers Association, the move is a part of the Association’s ongoing efforts to strengthen the foundation of the payments system and provide more reliable, efficient systems in line with the strategy and vision for the National Payments System.
The shift, he added will allow for access to efficient and affordable financial services to the customers.
“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,” Olaka said.
The adoption of the new standard is intended to open doors for banks and other players in the financial sector by improving operational effectiveness, enhancing customer experience, better Know Your Customer (KYC) information exchange, and providing a platform that will enable tighter payments integration and creative new services.
The transition is also anticipated to speed up electronic funds transfers by facilitating a decrease in processing mistakes.
On his part, the Director of Technical Services for the Kenya Bankers Association, Fidelis Muia said the ISO 20022 is the next significant development in the banking sector’s adoption of a wholly worldwide standard that will allow integration with any payments system in the globe.
“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.
ISO 20022 is a global standard for electronic messaging between financial institutions that originally created to provide the financial sector with a standardized platform for transmitting and receiving payment-related data.
Sybrin Kenya Operations Director Joe Kiragu stated that the ISO 20022 standard will make it possible for banks to offer global banking operations.
“The Kenya ACH will now be able to integrate with any ACH globally and any payments system out there,” said Kiragu.
The ISO’s update follows platform improvements made in 2019 that automated mandate applications and centralized bank direct debit instructions.
Additionally, it adheres to the 2019 requirement that all payment instructions include remitter information. This allows banks to quickly identify the payment instrument payee or remitter, reducing turnaround times while reducing disputed transactions and fraud.