Kina Automated Transfer System (KATS) Phase II Goes

BPNG rolled out the second phase implementation of the KATS “cheque truncation” and went live on September 8th, 2014. The significant turnout marked a spot on BPNG’s Calendar for 2014. Despite a few setbacks following the initial set date for KATS to go live, everyone agreed it was a successful transitional achievement.

Cheque truncation means that cheques are processed electronically. When a cheque is presented at a bank, the cheque is scanned front and back and transmitted electronically to the KATS. Once in KATS the cheque data forms part of a larger batch which is automatically processed and settled between banks. Each bank is able to view the images of their cheques and can use these images to verify signatures.

In banks, KATS is interfaced to that bank’s Core Banking System Services (BSS) which customer accounts can be credited and debited automatically. Eventually the entire manual processing previously associated with cheques is removed with less processing time. This applies particularly to cheques deposited by customers outside of National Capital District (NCD).

By way of example, under the old system a ANZ cheque deposited at a BSP branch in Lae would be processed by the receiving bank (BSP) and then transported to Port Moresby where it would be passed to ANZ Bank for final clearance and settlement. This swapping of physical cheques used to take place three times a day (four times on Fridays) between the four Commercial Banks and BPNG in the clearing room. (Because of this process a cheque takes up to seven (7) days to clear) Once a cheque is processed the tangible cheque will now be invalid and destroyed after 30 days. As a result of KATS, customers now have access to their funds within four (4) days.

In addition to the KATS software, each Bank are required to either implement a new Core BSS or make extensive modifications to their existing system.

In BPNG the project team consisting of personnel from all the four Department’s including assistance from a number of external consultants and software suppliers have made this remarkable improvement. It was truly a team effort and a credit to all those involved.

When fully implemented, it will enable customers to send individual or multiple payments from their bank accounts directly

to customers of other banks. For instance, if the Education Department is able to pay all teachers directly from the Department’s payroll system by initiating direct credits through BPNG out to their individual bank account. The system will reduce time and enable customers to gain access to clear funds within four (4) days. Taken phase 1 Real Time Gross Settlement (RTGS) together with phase 2 Automated Clearing House (ACH) and Phase 3 (direct credits); the cheque truncation will obviously improve PNG’s financial system in terms of speed, efficiency, safety and overall effectiveness.

A modern financial system is a prerequisite for developing an advanced economy. Thus KATS’s impact will be a major step forward in PNG’s alignment in advance payment system.