1. Preface
Safe, stable and efficient payment systems are critical to the effective functioning of the financial system. Payment systems are how funds are transferred, primarily among banks. It is the main channel through which financial shocks are transmitted across domestic and international financial systems and markets. Therefore, a robust payment system is the key infrastructure required to maintain and promote financial stability.
The payments system is the collective term for all the individual payment systems in a country and has a strong influence on the velocity of financial flows in the economy, the overall costs, and liquidity. It is also a channel for monetary policy transmission. The Bank of Papua New Guinea is committed to ensuring that it is safe and functioning efficiently. The Central Banking Act 2000 states that one of the primary objectives of the Bank is to “promote an efficient national and international payments system." This is strengthened further by the National Payments System (NPS) Act 2013, which provides the legal foundation to implement new payment types, such as electronic cheque truncation, which came into operation in September 2014, and direct credits in 2015.
The Bank of Papua New Guinea introduced the Kina Automated Transfer System (KATS) over the last three years with the objective of fostering an efficient payment system for processing and settling all payments (both small and large value) between all the banks and their customers. This included electronic payments, which are safe, efficient, fast, and predictable. The operation and usage of KATS are defined in the KATS System Rules. All the banks (including BPNG in its dual role as a bank and as the operator of KATS) agree to abide by the System Rules.
2. Types of Payment Instruments in KATS
There are three (3) types of payment instruments currently handled by KATS.
- Real-Time Gross Settlement (RTGS). These are mainly high-value and high-priority interbank or individual payment instructions that must be settled by debiting and crediting the accounts of the banks involved immediately (in real-time) and individually (gross) with finality and irrevocability (i.e., they cannot be disputed or reversed). It is a requirement of the KATS System Rules that every RTGS payment in favour of a customer of a bank must be credited to that customer’s account at the receiving bank within no more than two (2) hours of being settled in KATS.
RTGS went live on 14th October 2013.
- Electronic Cheque Exchange (Cheque Truncation). This is a process whereby cheques are scanned at the bank where they are deposited, and the images of the scanned cheques, together with the accompanying details, are exchanged between the banks electronically, via KATS. Currently, banks have a four-day period during which they can dishonour cheques. This period will be progressively reduced over the next one to two years as banks become more comfortable with KATS and the way it operates.
Cheque Truncation went live on 8th September 2014
- Direct Credits (DC’s). This is the process whereby an individual or company can request their bank to make a payment to the account of another individual or company at any bank. Direct Credits are settled twice daily within KATS. Depending on the time of day when a Direct Credit payment is processed by KATS, the funds are available to the recipient’s account on the same or the next day, if all account details are correct.
Direct Credits went live on 9th February 2015
3. Payment Systems Unit
Within BPNG, the Payment Systems Unit (PSU) is the operator of KATS and is responsible for opening and closing the KATS business day, monitoring the banks’ reserve funds, monitoring transactions between banks during the KATS operating hours, funding the Exchange Settlement Account (ESA) requirements, and responding to queries from all the commercial banks.
PSU is also responsible for producing payment statistics processed in KATS.
4. Inter-bank Transactions
In PNG, there is one single system that processes interbank transactions, which is operated and overseen by the Bank of PNG. It is a so-called hybrid system, which accepts both “low value” (cheques & DCs) and “high value/priority” (RTGS) payments.
Due to the different stages of KATS implementation, PSU began to compile statistics in January 2015.
Statistics from Jan-2015 to April-2025
TABLE 1: VALUES BY TYPES OF PAYMENTS
| Year | RTGS (K’ Million) | Cheques ( K’ Million) | Direct Credits (K’ Million) |
| 2015 | 31,598 | 43,426 | 13,181 |
| 2016 | 52,027 | 34,319 | 16,846 |
| 2017 | 42,972 | 28,356 | 18,740 |
| 2018 | 84,360 | 26,242 | 26,683 |
| 2019 | 98,102 | 23,460 | 31,052 |
| 2020 | 65,248 | 19,135 | 32,121 |
| 2021 | 64,324 | 17,577 | 36,679 |
| 2022 | 113,989 | 22,955 | 45,671 |
| 2023 | 195,285 | 18,226 | 54,009 |
| 2024 | 502,641 | 7,478 | 67,774 |
| 2025[1] | 130,780 | 1,713 | 23,548 |
| 2023 | |||
| Jul | 12,269 | 1,592 | 4,750 |
| Aug | 12,066 | 1,664 | 4,831 |
| Sep | 23,368 | 1,409 | 4,628 |
| QTR 3 | 47,703 | 4,665 | 14,209 |
| Oct | 26,151 | 1,368 | 5,405 |
| Nov | 28,855 | 1,307 | 4,981 |
| Dec | 30,734 | 1,217 | 5,011 |
| QTR 4 | 85,740 | 3,892 | 15,397 |
| TOTAL | 195,285 | 18,226 | 54,009 |
| 2024 | |||
| Jan | 23,131 | 1,191 | 4,938 |
| Feb | 24,657 | 791 | 4,996 |
| Mar | 31,270 | 665 | 5,696 |
| QTR 1 | 79,058 | 2,647 | 15,630 |
| Apr | 23,380 | 919 | 5,228 |
| May | 35,750 | 869 | 5,792 |
| Jun | 35,540 | 619 | 5,174 |
| QTR 2 | 94,670 | 2,407 | 16,194 |
| Jul | 51,187 | 368 | 6,374 |
| Aug | 51,443 | 421 | 5,536 |
| Sep | 43,146 | 345 | 5,663 |
| QTR 3 | 145,776 | 1,134 | 17,573 |
| Oct | 45,303 | 294 | 6,280 |
| Nov | 40,157 | 484 | 5,954 |
| Dec | 97,677 | 512 | 6,143 |
| QTR 4 | 183,137 | 1,290 | 18,377 |
| TOTAL | 502,641 | 7,478 | 67,774 |
| 2025 | |||
| Jan | 33,915 | 517 | 5,733 |
| Feb | 28,889 | 348 | 5,423 |
| Mar | 28,695 | 441 | 5,956 |
| QTR 1 | 91,499 | 1,306 | 17,112 |
| Apr | 39,281 | 407 | 6,436 |
| TOTAL | 130,780 | 1,713 | 23,548 |
[1] Data for 2025, only reports up to the month of April 2025
TABLE 2: VOLUMES BY TYPES OF PAYMENTS
| Year | RTGS | Cheques | Direct Credits |
| 2015 | 65,005 | 1,667,137 | 2,066,657 |
| 2016 | 70,372 | 1,419,753 | 2,419,273 |
| 2017 | 80,067 | 1,222,793 | 2,663,180 |
| 2018 | 96,857 | 1,073,319 | 3,062,576 |
| 2019 | 108,887 | 959,876 | 3,508,368 |
| 2020 | 105,488 | 705,048 | 3,958,155 |
| 2021 | 129,783 | 586,675 | 4,318,630 |
| 2022 | 185,602 | 553,485 | 4,927,565 |
| 2023 | 301,176 | 441,650 | 5,739,414 |
| 2024 | 478,455 | 146,500 | 7,068,873 |
| 2025[2] | 192,967 | 32,816 | 2,429,555 |
| 2023 | |||
| Jul | 25,916 | 38,338 | 452,157 |
| Aug | 30,131 | 40,792 | 524,985 |
| Sep | 26,639 | 33,568 | 487,849 |
| QTR 3 | 82,686 | 112,698 | 1,464,991 |
| Oct | 30,142 | 33,821 | 512,756 |
| Nov | 32,550 | 30,618 | 550,382 |
| Dec | 31,937 | 29,861 | 516,373 |
| QTR 4 | 94,629 | 94,300 | 1,579,511 |
| TOTAL | 301,176 | 441,650 | 5,739,414 |
| 2024 | |||
| Jan | 31,962 | 14,077 | 511,304 |
| Feb | 32,802 | 11,337 | 528,554 |
| Mar | 32,922 | 12,227 | 537,634 |
| QTR 1 | 97,686 | 37,641 | 1,577,492 |
| Apr | 36,230 | 14,019 | 554,607 |
| May | 40,827 | 14,664 | 612,911 |
| Jun | 35,222 | 12,671 | 525,634 |
| QTR 2 | 112,279 | 41,354 | 1,693,152 |
| Jul | 43,301 | 9,450 | 618,936 |
| Aug | 46,385 | 9,525 | 622,524 |
| Sep | 41,906 | 8,766 | 597,098 |
| QTR 3 | 131,592 | 27,741 | 1,838,558 |
| Oct | 46,478 | 9,994 | 698,538 |
| Nov | 44,430 | 12,331 | 624,787 |
| Dec | 45,990 | 17,439 | 636,346 |
| QTR 4 | 136,898 | 39,764 | 1,959,671 |
| TOTAL | 478,455 | 146,500 | 7,068,873 |
| 2025 | |||
| Jan | 48,178 | 16,841 | 598,910 |
| Feb | 46,094 | 3,769 | 577,677 |
| March | 49,009 | 5,249 | 611,654 |
| QTR 1 | 143,281 | 25,859 | 1,788,241 |
| Apr | 49,686 | 6,957 | 641,314 |
| TOTAL | 192,967 | 32,816 | 2,429,555 |
[2] Data for 2025, only reports up to the month of April 2025
Chart. 1: Values & Volumes by Real Time Gross Settlement (RTGS) Payments
Note: In April, total RTGS volume rose by 1.4 percent and the values saw a 37 percent increase respectively. This growth is primarily driven by a rise in transactions involving treasury bills, government inscribed stocks, payroll, intraday liquidity facilities with commercial banks, and repurchase agreements. The increase in values is in line with volume, where larger amounts of daily repurchase agreement repayments, treasury and central bank bills redemption where transacted. RTGS volumes are expected to continue increasing in the coming months as we observe more customers moving away from Cheques payments and utilizing electronic payment channels in place.
Chart. 2: Values & Volumes by Cheque Payments
Note: In April, Cheques volume increased by 33 percent, whilst the Cheque values declined by 8 percent. This rise in volume is primarily due to the clearance of low-value government Cheques, in contrast to the previous month. Since June 2024, only government and State-Owned Enterprise (SOE) Cheques have continued to be accepted for payment.
Chart. 3: Values & Volumes by Direct Credit (DC) Payments
Note: Direct Credit volumes grew by 5 percent and values rose by 8 percent respectively in the month of April. This increase is driven by the broader adoption of electronic payment platforms, as private sector Cheques were phased out in June 2024.
Refer to Footnote in Chart 4 for more details.
Chart. 4: Trends in RTGS, CHQS & DC Volumes since the launch of DC payments
In April 2025, the cheque volume and values increased by 33 percent and 8 percent respectively. Despite this uptick, cheque usage has significantly decreased since the introduction of KATS in 2015. In addition, the phase-out of private sector cheques on 28th June 2024, has also contributed to the decline in volumes, with government and state-owned enterprise cheques now only in circulation.
Looking ahead, cheque volumes and values are expected to decline further as electronic payment platforms continue to gain traction. This trend is reflected in the rise of Direct Credits, signalling a broader shift toward electronic payments.
Chart. 5: Cheques as a Proportion of Interbank Retail Payments
Chart 5 shows two trends that is the volume and value of Cheques as a percentage of total retail payments since 2015. It shows that both are declining. Cheques are being replaced by electronic means of payment, as expected.
Date Updated 06th May 2025
Source:
Payment Systems Department
Bank of Papua New Guinea