In briefing reporters recently at the bank’s boardroom in Banjul, Amadou Colley, governor of the Central Bank of The Gambia, said the modernization of the country’s payment system is part of a regional payments system initiative, which forms an integral part of the prerequisites for effective West African monetary integration.
The system, dubbed ‘The new automated cheque processing (ACP/ACH) and the Real Time Gross Settlement System (RTGS)’, is a development part of the bank’s strategic vision and forms part of a fruitful collaboration with the West African Monetary Institute under the West African Monetary Zone Monetary Integration Programme.
Whilst the system will metamorphose the country’s current payment and settlement structures into a world-class standard, it will also help lower costs, make payment and settlement more accurate, and pave the way for increased financial innovations in the country, Hon. Colley says.
The process, which spans across different facets, includes the establishment of the Real Time Gross Settlement System (RTGS), the Automated Cheque Processing/Automated Clearing House (ACP/ACH), Securities Settlement System (SSS) and an electronic National Switch for retail payments.
When the system becomes operational, it will help to eliminate or minimize risks associated with payments, clearing, and settlement system, float size for individual customers and banks as well as significantly reduce the float time for cheque clearance, with the possibility of reducing the clearance time from five days to one day.
This was why Governor Colley, who assumed office less than a year ago, was not hesitant to say that it will also “Pave [the] way for reducing high case intensity and gradual migration to high usage of electronic modes of payment, and bring efficiency to Government receipts and payments and all other consumers and leverage them for financial deepening of the economy”.
The CBG governor continued: “The rationale for the projects is justified by the fact that: The Gambia remains a cash-based economy, with payments of large value transactions requiring heavy movement of cash and its attendant risks; the continued dependence on cash payments also results to delays in cheque processing and inefficiency; and the cost of printing currency is quite high, thus the substitution of banknotes in favour of plastic cards under the National Switch project seeks to alleviate this problem.”
The current modus operandi put in place by the country’s central bank is “time-consuming and less efficient” in averting financial con, and that the delay in confirmation of customer balances due to the lack of real time gross settlement systems results to the acceptance of cheques, which would otherwise be rejected outright.
“The Central Bank currently operates a manual cheque clearing system, where commercial banks meet to physically exchange cheques and net balances settled through their current accounts held with the Central Bank, which is time consuming and less efficient in detecting cheque frauds,” Mr Colley said, adding that it will also ensure compliance with international principles and standards, especially the core principles for the Systematically Important Payments Systems (SIPS) of the Bank for International Settlement (BIS) and enhance the Central Bank’s monetary management capabilities.
ELIMINATION OF CHEQUE MOVEMENT
The latest technological innovation at the country’s financial apex body is a milestone feat, as the CBG boss said his institution wishes to harness technology to its advantage.
Governor Colley observed that the applicable technology in the field of finance enables the elimination of cumbersome dependence on physical movement of cheques for clearing purposes.
“It presents the fastest and most secure mode for clearing cheques through digital means and replaces the physical exchange of cheques between the presenting and paying banks. However, the effectiveness of the system depends largely on how users handle cheques,” he pointed.
Under the new system, all cheques payable through the banking system shall comply with specific characteristics, critical among which is the Magnetic Ink Character Recognition (MICR) code.
The MICR represents a unique code, which is inscribed on each cheque leaf, and forms the basis of electronic processing. Once the cheque passes through a scanner, an image is generated, which passes through the system electronically for timely confirmation of customer balances and the immediate payment of beneficiaries where applicable.
Governor Colley also highlighted the remaining challenges as regards the payment system: “However, the scanner cannot capture images of damaged cheques, which may result to processing failure. Cheques may be damaged through writing on the MICR code area, folding of cheques in a form which may prevent its passage through the scanning machine, soiling of cheques with oils, paints or other permanent marks: wear and tear of cheques due to poor storage facilities, stapling of cheques, forgeries aimed at defrauding the system among others.”
All the banks in the country, the CBG governor assures, are however adequately equipped with the means for the implementation of the new measures.
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