About Payments System in PNG
The National Payments System (NPS) is everything to do with the movement of money. This involves all the arrangements that enable funds to be moved from payers to payees, in whatever form or at whatever time, across the whole economy. The NPS therefore affects every individual, business and organisation in the country. It involves payment instruments such as cash, cheques and electronic funds transfer.
Papua New Guinea’s NPS
The Papua New Guinea NPS is still very much paper and cash based where cheques and cash transactions are the most common means of settlement, although some electronic type payments are also used. Cash remains the dominant means of payment both among the small percentage of the population in formal employment and the rural population. In the urban centres and within the employment sector cheques, eftpos, credit cards, direct bank and post office transfers are some of the methods of payment used.
The use of bank warrants ceased on 14th October 2013 with the introduction of the Kina Automated Transfer System (KATS) enabling the clearance initially of large value transactions, and later the settlement of low value payments between banks and individuals in February 2015.
The use of cheques as a means of payment is declining. This decline is due to employers in both government and private enterprise making payment of salaries and wages direct to their employee’s bank accounts. Another contributing factor is the availability of eftpos facilities. More people are using eftpos to make payments for goods and services, as an alternative to cash or cheques.
With the introduction of KATS, all high value or urgent payments are cleared on the same day and there is no deferred settlement. The Bank of Papua New Guinea provides the facilities for all Banks to settle their positions before the end of the day.
Cheque Clearing House
The Port Moresby Clearing House ceased operating on the 8th September 2014. This was due to physical exchange of cheques between banks being replaced with cheque truncation (i.e. exchange of electronic images of cheques and their associated data) through KATS for clearing and settlement of cheque payments.
Automated Clearing House (ACH)
KATS provides for clearance and settlement of cheque and direct credit payments four times per day from Monday to Friday. The first bulk clearing is from 9:00 – 9:30, second from 11:30 – 12.00 , third from 2.00 – 2.30 and the last from 4:00 – 4:30. The introduction of direct credit payments on the 9th February 2015 has provided further options for secure and efficient payments between individuals and organisations as an alternative to cheques.
Mobile phones are being increasingly used for making payments, either linked to bank accounts or using ‘electronic wallets’, particularly outside the main urban centres.
The SWIFT System is used for settlement of foreign exchange (FX) transactions between local Banks and their international counter party banks. BPNG also uses SWIFT for Settlement of FX transactions with all the commercial banks.