An Evaluation of the Usage and Operational Framework of the Real Time Gross Settlement System in the Zimbabwean Banking Sector

By Bhiri, Thomas; Vhimisai, Takaivona et al. | Journal of Emerging Trends in Economics and Management Sciences, October 2014 | Go to article overview

An Evaluation of the Usage and Operational Framework of the Real Time Gross Settlement System in the Zimbabwean Banking Sector


Bhiri, Thomas, Vhimisai, Takaivona, Bayai, Innocent, Journal of Emerging Trends in Economics and Management Sciences


Abstract

Payment systems have evolved over the years in tandem with the quantum leap in the volume and value of payment system transactions. Consequentially, the banking sector together with the financial regulatory institutions have developed safe, reliable and robust payment streams such as the Real Time Gross Settlement (RTGS) system. This research seeks to evaluate the usage and operational framework of the Real Time Gross Settlement system in the Zimbabwean banking sector. The cross-sectional survey research design was adopted for this research. The major findings from the research were that the RTGS system is widely available and optimally utilized. There are manual interventions between the RTGS system and core banking systems. It was concluded that there is capacity to synchronize the RTGS system with other payment streams, the RTGS system rules and procedures are not fully implemented by financial institutions and the framework governing the RTGS system is largely comparable to international best practice. Recommendations were that the RTGS system should be synchronized with other electronic payment streams, the adoption and implementation of the Straight-Through Processing should be expedited and that there should be an introduction of system availability barometers.

Keywords: real time gross systems (RTGS), payment systems, payment streams, operational framework, synchronize

INTRODUCTION

Over the last few decades, the issue of payment and settlement systems has been given prominence the world over. The payment system comprises institutions providing the payment services, the different forms of money, the means of transferring them and the contractual relationships linking the concerned parties. Payment systems can be divided into two broad categories namely small value and large value payment systems. Large value electronic payment systems are typically designed to process large value or urgent payments. In the case of Zimbabwe, the large value electronic payment system is known as the Real Time Gross Settlement system. The Real Time Gross Settlement system enables the public to receive as well as effect large value payments. Large Value Payment systems were adopted by many countries in the recent past as a tool for secure and efficient payment systems (Eisenbeis, 1995).

Many developing and developed economies have been redesigning large value payment systems through various fundamental reforms to support the increase in volume and value of payment system transactions, financial integration, technological advancement and financial participants' demands.

The main thrust of these developments encompass placing the large value payment systems at par with international standards, serving the requirements of domestic and international business and providing access to secure payment mechanisms to the banking public. As the large value payment systems develop, the obligation of the authorities and players in the financial services sector has been to ensure a sound and competitive financial system. To ensure that the transacting public receives a world class service with regards to large value payments, institutions in the financial services sector have been focusing on fostering the safety, efficiency and reliability of the payment system.

The rapid technological development and the deregulation of the financial sector in the last three decades have contributed to an inevitable surge in financial activity. These developments had the concomitant effect of increasing the volume and value of payment flows internationally. This trend is clearly illustrated by the significant increase in the volume and value of large value transfers handled by the major systems in the United States of America, China, Japan and the United Kingdom. According to Martin (2005), the large value payment system transactions in the United States of America increased from 50 times of the GDP in 1989 to 62 times of the GDP in 2003. …

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