Cheque clearance in Tanzania will soon go digital, thanks to a new technology that reduces costs and duration from between four and eight working days at present to hardly 48 hours.
The technology, according to users, has many benefits for banks and customers due to its economic and tactical advantages unlike the manual system which is obsolete and moribund. The current system, banks' solution experts say, involve vast amount of unnecessary labour while cheques are handled for up to eight times and transported for up to four times for each transaction.
The Sybrin System Sales Manager, Mr Daniel Parreira, said cheque truncation solution involves replacing the physical paper with the electronic image at the bank's branch where it was first presented. "This will be achieved through the 'teller capture process' which requires the front or back office clerk to capture cheque details, thus allowing for either holding or truncation at that point," Mr Parreira was quoted as saying in Dar es Salaam earlier last week.
Cheque Truncation System (CTS) or Image-based Clearing System (ICS), is a project currently undertaken by the Sybrin System, for faster clearing of cheques. CTS is basically an online image-based cheque clearing system where cheque images and Magnetic Ink Character Recognition (MICR) data are captured at the collecting bank branch and transmitted electronically.
Truncation means, stopping the flow of the physical cheques issued by a drawer to the drawee branch. The physical instrument (the cheque) is truncated at some point en route to the drawee branch and an electronic image of the cheque is sent to the drawee branch along with the relevant information like the MICR fields, date of presentation and presenting banks.
Cheque truncation, eliminates the need to move the physical instruments across branches, except in exceptional circumstances. This results in effective reduction in the time required for payment of cheques, the associated cost of transit and delays in processing, thus speeding up the process of collection or realisation of cheques.
The expected benefits include faster clearing cycle, which means realisation of proceeds of cheque, possibly within the same day. It offers better reconciliation or verification process, better customer service and enhanced customer window. The South African-based Sybrin Systems officials say to blend the traditional and modernity banking institutions have started employing electronic cheque conversion process.
Sybrin System's Sales Manager, Daniel Parreira, say CTS is a new way of clearing cheques and settlement between banks, using digital images without the physical exchange of cheques between banks. "Simply put," Parreira said "(CTS) is the process of converting paper cheques into an electronic format used during the transaction cycle."
The system works when a customer deposits a cheque. The bank takes an image of the cheque, transfer it electronically to the paying bank together with the cheque code and amount through the Automated Clearing House (ACH). The current system involves physical transporting all the cheques from all branches countrywide to the ACH for processing.
"This significantly reduces costs and processing time," said the Sales Manager, during Sybrin's road show seminar in Dar es Salaam. He assured the seminar participants mostly from banks that the system is secure as it uses encryption techniques and other security techniques during transmission.
The Bank of Tanzania has proposed September to be the starting date of using truncation system. In Africa the system is used in Malawi, Kenya, and Botswana. Once the data are scanned they are transmitted to the institution that holds the account on which the cheque was written for the settlement.
Sybrin then provides an image statement on which copies of the original cheques, written by the customers, are reproduced-cutting transport costs.
The Computech-ICS Limited Managing Director, Mr V. Jayatheerthan said they partnered with Sybrin after a two-month search for the firm that has the best solution that suit the country market's needs "We are satisfied that the banking application works. And this is the better of the economy and the banking industry-as it cuts time and unnecessary human costs," Mr Jayatheerthan at the sideline of the road show seminar.
Commercial Bank of Africa (CBA), Clearing Officer, Mr Allan Msaki, who participated in the seminar, said they welcome the solution as it takes a number of staff to process a cheque which has now been reduced to a single machine. "The solution is healthier for banks and customers alike," Mr Msaki said.