The 'Payment System' refers to the arrangements which allow consumers, businesses and organisations to transfer funds usually held in an account in a financial institution to one another, including the arrangements that ensure that funds move from accounts at one financial institution to another. It also includes payment instruments such as cash, cheques and electronic funds transfers used by customers to make payments.

The Papua New Guinea payment system

The Papua New Guinea payment system is still very much paper and cash based where cheques and cash transactions are the most common means of settlement, although some electronic type payment is also used. Cash remains the dominant means of payment both among the minority working class and the rural population. In the urban centres, within the employment sector, cheques, eftpos, credit cards, direct bank and post office transfers are some of the methods of payment used. Between Banks, bank warrants can be used for special clearance on large value cheques.

The use of cheques as a means of payment is declining. This decline is due to employers both in the government and private enterprise making direct payment of salaries and wages of employees to beneficiaries' bank accounts. Another contributing factor is that with the availability of eftpos facilities, more workers are using eftpos to make payments for goods and services, as an alternative to cash or cheque.

Clearing House

The Port Moresby Clearing House is controlled by the Port Moresby Clearing House Committee. It comprises a senior officer from each member bank, appointed by the respective bank. The Supervisory role of the Clearing House alternates between each member bank. The principles relating to basic banking procedures between banks, including clearing and settlement are governed by the ‘Record of Arrangement Between Banks (RABB).

Exchanges and Settlements

The Clearing House conducts three cheque exchanges daily on Mondays to Thursday and settlement with other banks take place at 4:45PM daily. On Fridays, there are four exchanges with the settlement conducted at 4:30PM.

All settlements between the banks are cleared on the same day and there is no deferred settlement. The Bank of Papua New Guinea provides facilities for all banks to settle their position at the end of the day.

The SWIFT system is used for settlement of foreign exchange transactions between local Banks and their international couterparty Banks.

Exchanges: refer to the physical handling over between member banks of cheques and all forms of credit transfer

Settlements: the daily payment or receipt of the net exchanges position between participating banks.