I read in the Daily Nation that the Central Bank of Kenya intends to bring into effect an automated check clearing system with the maximum value of checks being capped at Kshs 1 Million as from October 1st 2009.
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This will effectively reduce the number of days it takes for a check to clear from four to one – I like! When I worked in Banking in Kenya a while back, and on those days when I had to cover for someone in the Clearing Department, one of the most common occurrences was people constantly stopping by to check if their checks had cleared ( e-banking, mobile banking etc had not quite hit yet and to think that was just a few years ago!) This will definitely lead to efficiencies and also curtail check kiting to a large extent.
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Many people were Skeptical when the Check Clearing for the 21st Century Act (Commonly referred to as Check 21) was signed into law in the US 2003 and ultimately became effective end of 2004.
Around this time I was working in banking in the US and yes, we underwent all kinds of training, trouble shooting, etc to address the upcoming switch.
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Check 21 basically enhances the efficiency of the check clearing process in the US banking system. The law facilitates check truncation by the creation of substitute checks and process check information electronically. Substitute checks can still be sent to parties that want to receive paper copies and they are deemed legally the same as the original checks. This is only applicable to US based checks – foreign checks still have to go through the foreign collections process through intermediary banks.
What this basically means is the time that it takes for checks to clear is significantly reduced. In the US, under Regulation CC – Availability of Funds and Collection of Checks , banks have the right to place checks presented under “holds” up to 11 days until the funds clear, as long as the 1st $100 is made available next day ( I am paraphrasing this Reg coz I don’t want to go Fed Reserve Legal Jargon!
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What this has translated to is this: Using Checks these days is becoming more like using your Debit Card for a vast majority of merchants. For example – at Wal-Mart, Kroger etc, people will present checks, cashiers will run the check through scanners that will record the check info via the MICR ( Magnetic Ink Character Recognition), hand the paper check back to the customer, have them sign an authorization slip and you get home, check your balance on-line and the check has been processed!
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Effective and efficient – give or take! But, in my opinion the good outweighs the “bad”. Plus I know that most senior citizens with grandfathered accounts still need their paper checks sent to them – cant blame them – its what they were used to for as long as they had banking going on.
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In my opinion, Check 21 is a success and I hope the Central Bank of Kenya’s automated check clearing system will be a resounding success!
Sounds like a good thing. Trinidad has also seen alot of this type of progress in the last few years. It has really changed the banking system there.
Hi Cynthia
We are moving, albeit slowly. Our banks are light years ahead of our equities market as company after company goes under or under receivership or under the watch of CMA. We can only hope that they will be forced to adopt the technologies that will not only make them efficient but also less prone to rogue players.
We will see and experience the effects if and when the Check 21 system come into play.
Marvin
Janelle and Marvin,
The one thing I have confidence in in Kenya is the Banking system – maybe coz I have been in banking for a while now and I get it – 🙂 .
The relentless rate of positive change in Kenya the past few years has been awesome! Seriously – and with that kind of innovation, I have confidence our banking system should be able to handle the check clearing transition quite well…
I know most of us complain about fees – but that’s banking to you – anywhere in the world! Like they say “There is no such thing as free lunch” – the issue then becomes a bank that will provide the services you need, at cost-effective fees…
One thing I wish for is the we would move towards more of a Debit Card Culture in Kenya so we dont have to carry around huge sums of money – This in addition to the Credit Card Culture ( that I hope will be monitored well). I want to be able to just use my debit card and not have to worry about bank notes 😉
I, for one, can’t wait for that system to come into effect! I miss the convenience of banking my cheque and having funds from it available by end of the following day! Till I read this post I had no clue they were setting this up in Kenya.
egm – makes 2 of us 🙂 Some issues in life, like banking, need not be that complicated! I hope this will be one of those transitions that will be as glitch-free as can be 😉
Do you know what date this article was in the Nation? Someone on Twitter asked why despite the level of IT we have it still takes eons to clear cheques and I want to point him to this post.
EGM – I think it was around the same time I wrote this entry in June 2009 – I cant now find the exact day 😦
Hi Cynthia
They announced and formally launched this thing yesterday. The cheques will be cleared within two hours and this will only be for cheques above KES 1 million. They say that it will be so until people get comfortable enough to use them in cheques of smaller amounts.
I hope egm is reading this or watched it too.
Peace and Love
Dear Cynthia,
Okay, let me ask a dumb question, but first let me throw in the disclaimer that I know nothing of money and banking.
I seperated from my husband and he stopped all income, a dear friend felt sorry for the kids and I, so he gave us a check of $5K. Wow… Anyway, Bank America told me it would clear in 72 hours. However, when I went to use my ATM card 90 later, they declined it. I called the bank and they decided at the last moment to put a ten day hold on it, on top of the first 3 day hold. This can’t be right!
As the kids and I are going to have our utilities shut off very soon, is there anyway to speed up this processing time?
Thanks!