WHAT IS CHEQUE CLEARING?
Cheque Clearing is the process of moving cash (or its equivalent) from the bank on which a cheque is drawn to the bank in which it was deposited, usually accompanied by the movement of the cheque to the paying bank, either in the traditional physical paper form or digitally under a cheque truncation system.
CHEQUE CLEARING GENERATIONS
FISRT GENERATION MANUAL
Cheque clearing was limited to two clearing regions: Lusaka catering for the central, eastern and southern regions of the country and another in Kitwe catering for the Copperbelt, western and northern parts of the country. Before the introduction of the Zambia Electronic Clearing House, cheque clearing used to take exceedingly long. For example, a cheque drawn and deposited within the same clearing area (say Lusaka), on a Monday, would clear on Friday of that week; i.e. The date when value was given to the depositor (value date).
SECOND GENERATION AUTOMATED (PIC CODELINE CLEARING)
The first payment stream to go ‘live’ on the Zambia Electronic Clearing House is the Physical Inter-bank Clearing (PIC) i.e. automated processing of physical instruments such as cheques. The system went ‘live’ on 20 September 1999 recording 61,761 transactions with a value of K 281.8 billion As opposed to manually clearing cheques, specialized readers and software were deployed to read the MICR Codeline of the cheque and store this for any future reference. This further reduced clearing of cheques in clearing centers to three (3) days, generally referred to as T+3 clearing. However, despite these measures, upstream cheques in regions outside the clearing areas would take as long as 11 days which still posed challenges in the delivery of an efficient service. Additional controls were also required seeing that machines would play party to cheque fating a role previously performed by humans.
THIRD GENERATION AUTOMATED (CHEQUE TRUNCATION SYSTEM)
Cheque Truncation is the process of clearing cheques using images as opposed to using physical cheques. The physical cheque will be presented by the payee to their bank after which an electronic image of the physical cheque will be captured and sent to the drawer’s bank through the Zambia Electronic Clearing House. The drawer’s bank uses the cheque image and data to clear the cheque as opposed to the physical cheque. Under CTS there is no need to move physical cheques across banks or branches, except in exceptional circumstances.
WHAT ARE THE BENEFITS?
Cheque Truncation System has shortened and standardize the clearing period across the country to one clearing day (T+ 1) meaning value to the cheque is given a day after the cheque is deposited and thus facilitate early access to funds by customers. Further it has reduced the scope for clearing related frauds, minimize cost of clearing cheques, reduced reconciliation problems and eliminated logistics problems.