1.0 ABSTRACT
The
report introduced Ghana Interbank Payment and Settlement Systems Limited
(GhIPSS) a wholly owned subsidiary of the Bank of Ghana which was incorporated
in May 2007 with a mandate to implement and manage interoperable payment system
infrastructures. Helen V. Coult (1998) explains the Cheque Clearing System as a
debit –based paper system, which transfer funds from an account at one bank to
an account at another bank. The cheque Clearing System had seen tremendous
changes from the manual where physical cheques were exchanged between banks,
the semi-automated where the Magnetic Character Ink Recognition (MCIR)
mechanism was introduced to help sort out cheques for banks and the full
automation which truncated paper and rather images were transmitted through a
secured network.
The
process of cheque clearing automation has impacted in the various aspects of
payment systems, which culminated into efficiency in banks’ activities. With
automation, many banks and branches have streamlined their operations by employing
couriers to transport the cheque, thereby reducing the delays in physical. The
impact on services, staff and resources were analysed.
Aside
the tremendous achievements of the automated system, there are still some few
problems faced by the automated system, which impedes the benefits from automation
to be fully experienced.
A Four change strategic step was realized and used
to effect the change in the Cheque Codeline clearing system in Ghana was
discussed. Change can be a constant companion in the work place, but has a
scale and implications and factors that drive it. This could be by environmental factors, the
political sphere, business trends etc.
2.0 INTRODUCTION
The
Ghana Interbank Payment and Settlement Systems Limited (GhIPSS) is a wholly
owned subsidiary of the Bank of Ghana. It was incorporated in May 2007 with a
mandate to implement and manage interoperable payment system infrastructures
for banks and non-bank financial institutions in Ghana.
In
line with its mandate, GhIPSS has implemented and currently manages the
National Switch and Biometric Smart Card Payment System, e-zwich and the Cheque
Codeline Clearing (CCC) and Automated Clearing House (GACH) systems. The former
switches and settles automated banking and payment transactions while the
latter systems handle the electronic clearing of cheques and the processing and
settlement of bulk debit and credit transfers between banks.
GhIPSS
is committed to maintaining very high standards of excellence, reliability,
integrity, and timeliness for its entire infrastructure. These standards have
enabled GhIPSS to attain ISO27001 certification within two years of
commencement of business.
GhIPSS’
payment infrastructure is currently used by all banks in Ghana including Rural
and Community Banks and Savings and Loans.
Mission
To
partner the financial services industry in promoting, developing and managing
efficient and secure electronic payment systems.
Vision
To
migrate Ghana to an electronic payments society
Core values
Integrity,
Teamwork, Innovation, Passion and Dependability
3.0 ANALYSIS AND DISCUSSIONS
3.1 Analysis of the Origins and Processes
Helen
V. Coult (1998) explains the Cheque Clearing System as a debit –based paper
system, which transfer funds from an account at one bank to an account at
another bank.The funds are transferred by means of instruments such as cheques,
bank drafts, payment an order, divided warrants and other instruments deemed to
be eligible clearing operations. According to Chorafas (1987) the clearing
process comprises of three main processes;
a) A deposit by money
instrument(s) at a collecting bank for the credit of an account.
b) Exchange of the
money instrument(s) between the collecting and paying banks
c) Settlement between
the collecting and the paying banks
Since Ghana
inherited the cheque clearing system from the colonial masters at independence
in 1957, the clearing system has gone through the manual system, semi –
automated system and the full automation by computerization (cheque Codeline
clearing).
3.1.1 Manual System
This form of
clearing was held at a clearing house supervised by the Central Bank of Ghana
with movement of physical cheques between banks. Collecting Banks pass on to
the drawer banks all money instruments to be exchanged after manually sorting
them received from all their branches in a particular region. Each bank indicated the quantum of money
instruments received and delivered to the drawer bank on.
3.1.2 Semi – Automated System (Magnetic Ink Character Recognition)
The solution to the
manual sorting and listing of cheques which was a very difficult task was the
introduction of the Magnetic Character Ink Recognition (MICR) based mechanised cheque processing technology. The ink in
the encoded character is magnetised during the process
of clearing which generate electronic signals and interpreted by MICR readers,
allowing the cheque to be sorted and processed to prepare bank statement for
banking customers. MICR devices can process from 600 to approximately 1600
cheques per minute.
3.1.3 Cheque Codeline Clearing / Automated (CCC)
Cheque
Codeline Clearing with Cheque Truncation is an Electronic Clearing System for
cheques being introduced by the Bank of Ghana to replace the existing manual
(paper-based) Clearing System.
This
is the current system and it involves cheque processing using the image and Codeline
data of the cheque, thereby stopping the physical cheque at the first point of
deposit or at some other point en route to the paying bank. The decision by a
bank to “Pay or Not to Pay” a cheque will now be based on the cheque image and codeline data rather than the physical cheque. The
infrastructure supporting the new Cheque Codeline Clearing system is been
managed by the Ghana interbank Payment and Settlement Systems Limited (GhIPSS).
3.1.3.1 Technology Employed
‘The
infrastructure requirement for the CCC includes connectivity from the bank’s
Clearing House Gateway (CHG) server to the Clearing House (CH) server located
at GhIPSS. The Clearing House Gateway (CHG) connects to the capture system of a
bank to the Clearing House (CH) and provides a gateway for transmission of data
and images. It also performs the
required validations to ensure that the data entering the Clearing House (CH)
from the bank’s capture system meet the system’s requirements. The clearing
house gateway (CHG) receives the duly balanced outward clearing Capture Exchange
File (CXF) (containing MICR Codeline data) and Capture Image Binary File (CIBF)
(containing images) from the capture system of the bank.
The
incoming images are subjected to image quality assurance (IQA)
validations. The images which fail IQA
validations are rejected with an appropriate response file.
The
CXF and CIBF files presented by the capture system will be validated by the CHG
against the file and item level validations indicated in the CH of the CHG, as
may be released by the CH from time to time.
Each exchange file is digitally signed and encrypted before it is
transmitted to the CH. Banks plan
transmission of their outward presentment by taking into account presentment
volume, network bandwidth with the CH and session window’. The time demarcation at the CHG is in
synchronization with the CH in order to avoid the rejection of clearing files
by the CH due to closure of a session. In effect, physical cheques that use to
be cleared bilaterally which required a lot of time and resources is been
cleared over internet protocol.
3.2
The Impact Of Automation Of Cheque
Clearing System
The
process of cheque clearing automation has impacted in the various aspects of
payment systems, which culminated into efficiency in banks’ activities.
Automation,
according to Chorafas, (1987) had enormous impact on the acceptance of payment
arrangements in which corporations and consumers agree to permit their account
to be credited and debited electronically.
He
added that, the operations of automatic clearing houses demonstrated a common
interest among banks to work more closely together in the field to handle the
increasing volume and cost of inter-bank transfer.
Automated
cheque clearing system is capable of handling increased volumes without much increase
in the manpower floor space and processing time and more comprehensive
information to banks/branches relating to their inward and outward clearing can
be provided. Zaato (1996)
As
documented by the Ghanaian Banker Vol. 2 (1996), since the implementation of
automated cheque clearing, a vast amount of work at the banks or branches has
been cut down. One factor, which has helped in the faster clearing process, is
the recording of data on magnetic tapes diskettes and drives.
With
automation, many banks and branches have streamlined their operations by
employing couriers to transport the cheque, thereby reducing the delays in
physical transportation.
Chorafas
(1987) elaborated that consumers benefited by a reduction in the time required in
paying bills and a lowering of banks’ services charges.
‘Corporations
were able to reduce their lockout charges and eliminate the need to reconcile
paper cheques. However these trends provide opportunities for greater
efficiency and flexibility for the suppliers and users of financial services.
It also highlights differences in the supervisory, accounting, tax and
regularly treatment of transactions of institutions.
According
to Zaato (1996), the pivotal impact the cheque payment system plays in the
economy cannot be over emphasized. The automated cheque clearing system plays
an immense role in the financial stability in the country where-by a robust and
efficient payment system ensures payment obligation to be met on time. This,
however, boosts confidence in the financial standing of traders in the market
and also any major stock or disruption in the payment system will be quickly
transmitted to the financial system and which enhance financial stability.
Moreover,
the automated cheque clearing system or payment system also acts significantly
in monetary policy implementation. This provides a reliable payment system with
the same day settlement which ensures liquidity in the interbank
market and encourages active participation of borrowers and lenders, which
provides a good indicator of monetary conditions in the economy as a whole.
(Shepard, 1996)
Economic
stability emerges from the effective impact of the automated cheque clearing
system according to Boateng (1999) where a well – organized system ensures the
certainty of payments. Expenditure can be planned efficiently if the arrival of
funds is accurately predicted and money can be available for productive purpose.
The
automated cheque clearing system facilitates the procedure of vetting
instruments to detect forged signatures, photocopy cheque by the use of coloured
copiers together with scanners, availability of funds, and staleness of cheque
and alteration fraud by the use of chemical ink.
The
sensitivity of the automated system to check fraudulent clearing of cheque
enable banks to address the security of cheque clearing which is a major impact
of the implementation of the automated cheque clearing machine (William,
1994).
Conclusively,
however, Chorafas (1987) in his study about electronic banking vehemently
stressed that banks should endeavour to automate their various functions of
dealings to bridge the gap of information technology in the advancing world.
3.2.1 Impact of Automation of Clearing System on Staff
Ultimately,
it is assumed that automation takes the duties of staff in the place of making
them redundant in their various field of endeavour. Eason (1988) for example,
point out in his findings that automation is likely to benefits from staff
reduction could well have been overestimated and other desired benefits may
become important. Moreover Kupush and Whitcomb (1987) acknowledged in their
findings that automation freed from many routine, repetitive task, office
personnel find that they are capable of accomplishing more work than in the
past. But, however, the elimination of repetitive task results in elimination
of redundant staff. In a survey conducted by Bankers Clearing House Association
in 2010 the response rate made it clear that, there was a great reduction in
the population of staff at the various commercial banks except few with a
little margin of increment. But obviously, it is not surprising that,
automation of the clearing system saw a reduction of staff population in most
of the commercial banks.
3.2.2 Impact of Automation on Financial Resources
In
the survey conducted by Bankers Clearing House Association (2010), there was an
increase in expenses of cheque clearing due to automation of the clearing house
by GhIPSS. The expenses of the clearing house were due to the cost of hardware
(acquisition of new specified Servers for the gateway and archiving and
purchasing of UV cheque scanners for every bank branch), cost of software (the
ECPIX, cheque image viewer and Archiving), and increasing bandwidth to meet
specification and other peripherals as well as maintenance. All 27 Bank staffs
were trained in India at their own cost.
Tamakloe
(2003) concurs in her feasibility studies that, the most identified constraints
of automation are about inadequate financial resources for acquiring the
necessary hardware, developing software, educating and training staff,
planning, designing and implementing the system.
3.2.3 Impact of Automation on Services
Automation,
in actual fact, is purposefully implemented to enhance the activities of an
organization. The cheque clearing system
has seen an enhancement in the number of cheques cleared daily by the use of
the automated system as compared to the manual method of clearing.
In
a survey by the bankers clearing house association (2010) it was revealed that
the quantity of cheques have increased by 60%. Since the implementation of
automated cheque clearing system, a vast amount of work at the bank or branches
has been cut down, helping in faster clearing process.
This
supports Zaato (1996) when he indicated that automated cheque clearing system
is capable of handling increased volume without much increase in the manpower
floor space and processing time.
However,
the findings also revealed reduction or the extent of less time in the clearing
processes which describe the efficiency of the automated system as compared to
the manual method of clearing. This findings specifically conforms to Chorafas
(1987) revelation that, consumers benefited from the automated system by a
reduction in the time it required to pay bills and a lowering of bank’s service
charges.
3.2.4 The Problems Encountered with Automation of the Clearing House
Aside
the tremendous achievements of the automated system, there are still some few
problems faced by the automated system, which impedes the benefits from
automation to be fully experienced.
Network
connectivity failure and instability has been the major challenges since the implementation
of the automated clearing cheque systems. This has many a time delayed the
clearing process.
Many
banks have also suffered the failure of their UV cheque scanners which could
not capture and transmit cheque images therefore they could not participate in
the clearing session.
3.3 Change Management Strategy
Change
can be a constant companion in the work place, but has a scale and implications
and factors that drive it. This could be
by environmental factors, the political sphere, business trends etc. This can
also come about due to the expectation of the stakeholders. It can also come
about through a proactive and strategic way or through responses to crisis
within the organization or the environment. It could be a response for
improving quality, customer satisfaction etc.
Four
change strategic steps was realized for the change in the Cheque Codeline clearing
system in Ghana; Empirical-Rational, Normative Reeducative, Power Coercive and Environmental
Adaptive
3.3.1 Empirical-Rational
There
was the need to change the paper base operations of the clearing system in
Ghana which was not only expensive but time consuming and full of human errors.
The Bank of Ghana saw the need to effect a systematic strategic change.
It began with a planning stage where
conferences between the Manager of all the Universal banks and the Central bank
were held to discuss the need for a change in the system that will be very cost
effective for the banks. They also looked at the viability of the project and
its effect on the banks and on the national economy. It also looked at the
delays in the current system and its effect on the bank customers and their
businesses.
3.3.2 Normative Reeducative
Having
created the awareness and the need for the change, the managers in the various
banks were taken through sampling training to understand the system and to be
change advocates in their various banks.
The banks having come in full terms for the need for this change got
committed and fully involved.
The
next step of education was to train the targeted clearing managers who will
actually become trainers of the project. The training was held in a life
environment in India where the system was already in place.
3.3.3 Power Coercive
The
banks having bought into the project and seeing its benefits became agents of
change and started massive education to their customers through the print and
electronic media. Huge billboards were raised at vantage point to educate the
banking public. Flyers were also distributed to every nook of the nation to
broaden the education and publicity of the change. Some banks branded it as their own product,
which saw the publicity of this system huge. All these were very well planned
and were successful.
3.3.4 Environmental Adaptive
After
a successful educational campaign, the first phase of implementation which was
the User Accessibility Test (UAT) was introduced. A test environment was created for the all
bank to try the system. They gave
feedbacks on the test done and all shortfalls of the system were done for a
parallel run of the old and new system to see the effect of the automated
system.
After
ensuring the effect and proper functioning of the system, a full implementation
date was set and publicises so as to make the
banking public aware on the benefits of the project and the date it will go
live.
Finally
the banks engaged service providers who will supply and maintain both the hard
and software for full live implementation of the system.
4.0 CONCLUSION
This
report has assessed the impact of automation of the Inter-bank cheque clearing
system with a view to enhance the activities and operations of cheque clearing
as well as provide better services to customers.
In
this purview it revealed that, automation has had a positive impact on the
activities of clearing. Automation has made it possible to curb fraudulent
processing of cheques, improve efficiency and effectiveness of clearing
operations and also reduced the number of working days and time it takes to
clear cheques.
The
write up, however, revealed that automation has impacted on the number of staff
by reducing the number of staff to the minimum to manage the affairs of cheques
clearing.
Nevertheless,
automation has also changed the staff time of reporting to work significantly
which accelerate the efficiency of the clearing process. It, however, lessen
the responsibility of staff, update various account automatically at their
various banks as well as serves as an archival system of all cheques processed
for easy retrieval in the future.
In
spite of all these benefits, automation has also increased the expenditure of
the clearing system but this should not be a hindrance which will discourage
other clearing departments of automating their services and operations since
they stand to benefit greatly from it.
The
Automation of cheque clearing system (CCC) championed by GhIPSS has come as a
permanent existence and so all clearing departments in the banking profession has
embrace the concept of automation to bridge the gap of technological
development as well as provide an improved and efficient service to their
customers.
5.0 REFERENCES
1. BOATENG, E .A, (1999) A Study about the Payment Systems in Ghana,
Accra. Catholic Press.
2. Business and Financial Times
Newsletter (2000); vol.4 Pp. 9.
3. CHORAFAS, N. D (1987); Strategies planning for electronic banking,
London; The MIT Press Pp 311 – 333.
4. EASON, K. (1988); Introduction Technology and Organizational
Charge. London; Tay and Francis.
5.
HELEN .V. COULT, (1998); The Banking
Certification Series, business calculation for Bankers. London; McGraw-
Hill. Pp 186-201.
8. KUPUSH, J. AND WHITCOMB, S. (1987);
“The Electronic Office. California; Glencoe Publishing Company. Pp. 8
9. SHEPARD DAVID; (1996); Center for Central Banking Studies. Bank of England. London; McGraw-Hill
Pp 14 – 24.
10. WILLIAMS MARK (1994); The History of Cheques. New York. Van
Nostrand Reinhold. Pp 15 – 17.
11. ZAATO D. Y ;( 1996); Ghana Payment Systems – the way forward, a
paper presented at a seminar on payments systems at the National Banking
College. Accra
