Kina Automated Transfer System (KATS) Phase II Goes-Live

BPNG has implemented Phase Two of KATS, “cheque truncation” and Automated Clearing House, which went live on September 8th, 2014. This milestone represented a significant achievement on BPNG’s Calendar for 2014. Despite a few teething issues following the initial go live of KATS Phase Two, 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 paying bank via KATS. Once in KATS the cheque data forms part of a larger batch that is automatically processed and settled between banks. Each bank is able to view the images of their cheques and use these images to verify signatures.

KATS is interfaced to each Bank’s Core Banking System (in the case of BPNG this is BSS) so that customer accounts can be credited and debited automatically. In addition to linking to the KATS system, each Bank was required to either implement a new Core Banking System or make extensive modifications to their existing system.

Eventually the entire manual processing previously associated with cheques will be removed thus reducing processing time. This applies particularly to cheques deposited by customers outside of National Capital District (NCD). By way of example, under the old system an ANZ cheque deposited at a BSP branch in Lae would be processed by the receiving bank (BSP) and then physically transported to Port Moresby where it would be passed to ANZ Bank for 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 a clearing room at BPNG. Under the old process a cheque could take up to 7 days to clear. Once a cheque is processed using KATS the physical cheque will then be invalid and destroyed after 30 days. As a result of KATS, customers now have access to their funds within 4 days.

In BPNG the project team consisting of personnel from four Departments, with assistance from a number of external consultants and software suppliers, made this remarkable improvement to the National Payments System. It was truly a team effort and a credit to all those involved.

When fully implemented, KATS will enable customers to send individual or multiple payments from their bank accounts directly to the accounts of customers of other banks. For instance, the Education Department will be able to pay all teachers directly from the Department’s payroll system by initiating direct credits through BPNG out to the individual bank accounts of the teachers.

KATS will reduce the time to process cheques and enable customers to gain access to cleared funds within 4 days. The KATS System, when all Phases are implemented, (Phase 1 – Real Time Gross Settlement (RTGS), Phase 2 – Automated Clearing House (ACH) and Phase 3 (Direct Credits); will significantly 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 will be a major step forward in providing a vital part of the financial infrastructure to enable growth in the PNG economy.