As part of its Financial Sector Development Strategy that was formulated in 2012, government plans to introduce electronic cheque imaging and truncation to reduce the cheque-clearing cycle.
The Minister of Finance and Development Planning, Kenneth Matambo, made this announcement when presenting his 2015/16 budget speech. He said that the object of this initiative is “to reduce the cheque-clearing cycle from the current four to two days. A successful implementation of the project will allow bank customers paid by cheque to have quicker access to their funds.”
Through cheque imaging, the electronic images of cheques are captured at the time a cheque is processed through the cheque clearing system. The processing centre of the financial institution receiving the cheque captures the amount, the electronic codeline data at the bottom of the cheque and a digital image of the front and back of the cheque. This digital image is then sent to the institution that the cheque is drawn on and will be used for the purposes of clearing, fraud detection and confirmation. Electronic cheque imaging eliminates the practice of returning cancelled cheques and the need for financial institutions to send and store cancelled cheques because they are destroyed after they have been imaged and verified. Its other advantage is that it is less labour-intensive, thereby reducing staff hours dedicated to handling and processing physical cheques.
The government’s initiative follows a migration to a worldwide electronic cheque-clearing process that in part, was motivated by events of September 11, 2001 in the United States when some US$47 billion worth of cheques could not be processed because all airline traffic had been grounded for days. Occurrences such as courier delays due to weather conditions can also affect clearing performance. Three years after the September 11 attacks and at the urging of both the Federal Reserve Bank and the banking industry, Congress passed a law that introduced electronic cheque imaging to the US. Other countries have followed suit since.
On the whole, Matambo said that government remains committed to the implementation of the Financial Sector Development Strategy whose aim is to promote a smooth development of the financial services sector, including the development of the domestic capital market.
“Some of the measures pursued in this regard include development of financial regulatory framework and policies, as well as adequate resourcing of relevant regulatory institutions,” he told parliament.