Kina Automated Transfer System (KATS) Monthly Statistics updates

Monthly Analysis on the Use of Payment Instruments

1. Preface

Safe, stable and efficient payment systems are critical to the effective functioning of the financial system. Payment systems are the means by which funds are transferred, primarily among banks. It is the main channel that 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 in 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 that 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 days period during which they can dishonor 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 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 which 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 & DC’s) and “high value/priority” (RTGS) payments.

Due to different stages of KATS implementation, PSU began to compile statistics in January 2015.

Statistics from Jan-2015 to Aug 2021

 
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 105,248 19,135 32,121
 
2019      
Jan 6,871 2,250 2,203
Feb 12,022 1,670 2,087
Mar 8,810 1,895 2,329
Apr 5,843 1,826 2,465
May 10,791 2,022 2,562
Jun 11,009 1,757 2,247
Jul 10,283 2,091 3,427
Aug 7,758 1,827 2,506
Sep 6,413 1,764 2,313
Oct 6,179 1,969 2,954
Nov 6,230 1,888 2,762
Dec 5,893 2,501 3,197
TOTAL 98,102 23,460 31,052
       
2020      
Jan 4,4502 1,860 2,755
Feb 7,824 1,535 2,485
 Mar 14,483 1,573 2,738
April 3,214 1,387 2,659
May 6,408 1,413 2,460
Jun 3,316 1,439 2,495
Jul 3,994 1,697 2,827
Aug 4,474 1,262 2,582
Sep 3,554 1,430 2,526
Oct 4,734 1,664 2,829
Nov 4,403 1,576 2,741
Dec 4,342 2,299 3,024
TOTAL 105,248 19,135 32,121
       
2021      
Jan 4,766 1.550 2,686
Feb 4,560 1,215 2,525
Mar 3,333 1,281 2,857
Apr 4,515 1,293 2,934
May 6,256 1,435 2,644
Jun 4,752 1,504 2,898
Jul 3,999 1,398 3,303
Aug 4,112 1,413 3,007

 

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
 
2019      
Jan 8,399 71,895 267,028
Feb 8,528 72,656 249,683
Mar 8,363 79,542 268,188
Apr 9,081 80,491 261,944
May 9,628 86,337 304,982
Jun 8,942 74,043 259,067
Jul 9,749 85,451 298,476
Aug 9,335 77,603 291,053
Sep 8,229 78,015 283,388
Oct 9,757 88,839 359,650
Nov 9,178 79,576 323,166
Dec 9,698 85,428 341,743
TOTAL 108,887 959,876 3,508,368
       
2020      
Jan 8,886 66,640 332,648
Feb 8,700 65,648 312,292
Mar 9,019 61,899 335,739
April 7,002 44,826 325,789
May 8,616 54,152 310,001
Jun 8,596 57,760 313,013
Jul 9,169 60,846 351,753
Aug 8,977 53,709 306,933
Sep 8,776 56,451 336,837
Oct 9,129 56,156 334,091
Nov 8,493 56,917 322,270
Dec 10,125 70,044 376,789
TOTAL 105,488 705,048 3,958,155
       
2021      
Jan 8,223 43,501 316,256
Feb 9,451 46,485 323,144
Mar 8,734 47,835 356,064
Apr 8,643 45,647 343,933
May 9,213 49,224 338,076
Jun 9,851 50,299 364,833
Jul 12,655 50,089 373,650
Aug 12,564 51,511 359,550

 

 

Chart. 1: Values & Volumes by Real Time Gross Settlement (RTGS) Payments
Note: RTGS volume decreased slightly in the month August compared to the previous month of July while the total value increased slightly. This indicates that there was a reduction in the number of interbank transactions between banks with lower value payments during the month of August.
 
Chart. 2: Values & Volumes by Cheque Payments.
 
 

3: Values & Volumes by Direct Credit (DC) Payments

 

Note: More customers are making payments electronically hence there is an increase in Direct Credit transfers for the last two months since May.

4: Trends in RTGS, CHQS & DC Volumes since the launch of DC payments
5: Cheques as a Proportion of Interbank Retail Payments
Chart 5  shows two trends. It shows that the volume of cheque and the total value of cheques, as a percentage of total retail payments, are both declining. Cheques are being replaced by electronic means of payment, as expected.

 

Date Updated: 02nd September 2021
Source: Payment Systems Department, Bank of Papua New Guinea

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