Sadc Payment Systems Project Zambia Progress Report for the Period April 2011 to March 2012

SADC PAYMENT SYSTEMS PROJECT ZAMBIA PROGRESS REPORT FOR THE PERIOD APRIL 2011 TO MARCH 2012

1 INTRODUCTION

This report reviews the developments that took place in the Zambian National Payment System between April 2011 and March 2012. During the period under review, the Bank of Zambia in consultation with various stakeholders continued to implement some initiatives intended to enhance efficiency and safety of the payment systems.

2 ZAMBIA INTER-BANK PAYMENT AND SETTLEMENT SYSTEM

During the year under review, one new bank was designated as participants on the Zambia Inter-bank Payment and Settlement System (ZIPSS) bringing the total number of participants to eighteen (19).

The volume of transactions processed increased by 15% to 203,637 transactions (2010/11: 176,808 ) with the transaction volumes peaking in December 2011. The total value of transactions processed similarly, increased by a 10% to K334,823 billion (2010/11: K304,473 billion).

The increase in the volume and values of transactions is attributed to an increase in both the volume and values of interbank transactions and foreign exchange transactions during the period under review.

ZIPSS volumes and values

VOLUMES VALUES

Month 2009/10 2010/11 2010/12 % 2009/10 2010/11 2010/12 % Change Change K K K Billions Billions Billions

Apr 11,083 12,589 14,654 16% 15,812 16,002 24,272 52%

May 10,950 13,051 16,239 24% 15,100 15,468 25,714 66%

Jun 11,603 14,326 16,893 18% 17,670 23,790 30,881 30%

Jul 15,616 14,267 16,764 18% 18,248 23,548 27,345 16%

Aug 12,028 15,050 18,577 23% 17,678 31,019 33,929 9%

Sep 13,088 16,549 17,332 5% 18,711 28,088 37,256 33%

Oct 13,620 14,863 17,583 18% 17,188 27,964 30,365 9%

Nov 12,736 14,863 17,994 21% 14,143 31,103 27,923 -10%

Dec 14,542 17,079 18,834 10% 17,812 36,006 30,603 -15%

Jan 12,077 13,104 15,962 22% 14,191 19,954 20,958 5%

Feb 12,682 14,727 16,414 11% 15089 20,086 24,286 21%

March 13,329 16,340 16,391 0% 15083 31,445 21,291 -32%

Totals 153,354 176,808 203,637 15% 196,725 304,473 334,823 10%

3 SETTLEMENT SYSTEM DEVELOPMENTS AND PROJECTS

3.1 LINKING OF LUSAKA STOCK EXCHANGE TO ZIPSS/RTGS

The Bank of Zambia, the Lusaka Stock Exchange, the Securities Exchange Commission and the commercial banks continued to work towards putting in place measures that will facilitate the settlement of capital market trades in central bank money through the Real Time Gross Settlement System (RTGS). This measure will ensure that Zambia achieves international standards for settling payments that are considered to be systemically important.

4 RETAIL SYSTEM DEVELOPMENTS AND PROJECTS The country has two systemically important payment systems namely the Physical Inter-bank Clearing and the Direct Debit and Credit Clearing.

4.1 Physical Inter-Bank Clearing During the period under review, the volume of cheques cleared through the Physical Interbank Clearing (PIC) system decreased marginally by 0.15% to 2,644,585 from 2,648,523 cheques in the previous period while the value increased by 11.47% to K26,798 billion from K24,040 billion reported in the previous period (see Table below).

Physical Inter-bank Clearing volumes and values Volumes Values (K'Billion) Month % 2009/10 2010/11 2011/12 2009/10 2010/11 2011/12 % change change Apr 208,038 208,075 199,069 -4.33% 1,747 1,751 1,910 9.08%

May 199,201 212,945 226,516 6.37% 1,655 1,808 2,131 17.87%

Jun 217,898 224,092 222,145 -0.87% 1,813 1,945 2,116 8.79%

Jul 224,151 218,502 215,626 -1.32% 1,928 1,974 2,137 8.26%

Aug 203,819 223,034 238,608 6.98% 1,744 2,047 2,446 19.49%

- Sep 226,102 227,713 204,907 1,924 2,098 2,179 3.86% 10.02%

Oct 222,573 241,020 226,677 -5.95% 1,914 2,261 2,375 5.04%

Nov 216,296 231,060 230,777 -0.12% 1,876 2,152 2,450 13.85%

Dec 221,528 224,397 221,159 -1.44% 1,998 2,165 2,376 9.75%

Jan 197,032 205,181 220,820 7.62% 1,643 1,871 2,273 21.46%

Feb 199,884 204,140 216,011 5.82% 1,652 1,837 2,160 17.60%

Mar 225,215 228,364 222,270 -2.67% 1,864 2,131 2,245 5.37%

Total 2,561,737 2,648,523 2,644,585 -0.15% 21,758 24,040 26,798 11.47%

Monthly 213,478 220,710 220,382 -0.15% 1,813 2,003 2,233 11.47% Average

4.2 Direct Debit and Credit Clearing During the year under review, the volume of transactions processed through the Direct Debit and Credit Clearing (DDACC) payment stream increased by 35.82% to 3,287,751 from 2,420,739 in the previous period. Similarly, the value of DDACC transactions increased by 33.30% to K9,300 billion from K6,977 billion reported in the previous period (see Table below). The increase in the volume and value of transactions can be attributed to customer’s increased preference for electronic payment methods.

Direct debit and credit clearing volumes and values Volumes Values (K'Billion) Month % % 2009/10 2010/11 2011/12 2009/10 2010/11 2011/12 change change Apr 115,499 152,030 209,142 37.57% 353 428 650 51.87%

May 117,493 148,399 257,268 73.36% 395 454 751 65.42%

Jun 138,038 196,372 232,349 18.32% 360 539 761 41.19%

Jul 127,794 211,333 245,921 16.37% 367 576 775 34.55%

Aug 116,058 204,692 249,425 21.85% 365 584 763 30.65%

Sep 116,490 182,972 238,848 30.54% 367 575 700 21.74%

Oct 127,437 197,926 318,404 60.87% 387 579 755 30.40%

Nov 128,696 219,607 288,458 31.35% 370 627 799 27.43%

Dec 159,205 255,245 332,102 30.11% 499 753 935 24.17%

Jan 116,090 202,672 313,913 54.89% 378 556 778 39.88%

Feb 124,475 208,510 296,569 42.23% 390 602 811 34.80%

Mar 173,404 240,981 305,352 26.71% 468 704 822 16.76%

Total 1,560,679 2,420,739 3,287,751 35.82% 4,699 6,977 9,300 33.30%

Monthly 130,057 201,728 273,979 35.82% 392 581 775 33.30% Average

4.3 National Switch

Progress on the National Switch has been slow. However, the project is expected to pick up pace as a number of rearrangements have been put in place so as to expedite the implementation of the project.

A National Switch is a payment gateway that facilitates inter-connectivity between various financial institutions and payment systems and allows for authentication and routing of payment details of various e-commerce transactions and e-government activities.

At the most basic level a National Switch is used to interconnect different banks to allow sharing of access devices. This allows customers of banks which do not have such infrastructure in a particular area or do not have the infrastructure at all to use the infrastructure of other banks hence improving efficiency and convenience for consumers. More importantly however, the National Switch can be used as a hub for interconnecting various electronic payment products (such as mobile payment services, internet payments, automated teller machines, point of sales and bank accounts).

4.4 CHEQUE TRUNCATION PROJECT

During the year, the Bank of Zambia continued collaborating with ZECHL and commercial banks in the implementation of a Cheque Truncation system. The project has made considerable progress and is expected to be implemented in August 2012.

Cheque Truncation is the process of clearing cheques using cheque images as opposed to using physical cheques. The Cheque Truncation System envisages a more efficient and safer system for clearing of the cheques. Cheque Truncation is also expected to enhances customer service, reduce the scope for clearing related frauds, minimize cost of clearing cheques, reduce reconciliation problems as well as eliminate logistics problems.

5.0 DESIGNATION OF PAYMENT SYSTEMS, PARTICIPANTS AND BUSINESSES

The Bank of Zambia designated two Payment Systems business one payment systems participants, bringing the total number of designated entities to three payment systems, nineteen payment system participants and twenty nine payment system businesses. Below is a table showing the payment systems, businesses and participants that have been designated so far.

DESIGNATED PAYMENT SYSTEMS AS AT APRIL 2012

Payment Systems Services 1 Zambia Electronic Clearing House Ltd PIC & DDACC Clearing 2 Zamlink e-Switch Switching services 3 Bank of Zambia ZIPSS/RTGS

Payment Systems Businesses Services Mobile payment services and money 1 Celpay Zambia Limited transmission services 2 Mobile Payment Solutions Mobile payment services Mobile payment services and money 3 ZMP Limited transmission services Mobile payment services and money 4 Mobile Transactions Zambia Ltd transmission services Mobile payment services and money 5 MTN Mobile Money Limited transmission services 6 National Savings and Credit Bank Money transmission 7 Money Express Limited Money transmission 8 Zampost Money transmission 9 NECOR Transtech Money transmission 10 Runnymede Money transmission 11 Bayport Money transmission 12 United Bank for Africa Money transmission 13 Finance Bank Zambia Money transmission 14 Stanbic bank Money transmission 15 ZANACO Money transmission 16 Investrust bank Money transmission 17 CFB Money Transfer Limited Money transmission 18 Money Link Zambia Limited Money transmission 19 Ecobank Money transmission

20 PostDotNet Money transmission 21 Cactus Financial Services Money transmission 22 Standard Chartered Bank Money transmission 23 Access Bank Money transmission Brookfield Limited T/A Genesis Global 24 Finance Money transmission 25 FX Africa Bureau de Change Prepaid Payment Card 26 Calltrol Debit card transaction switching 27 AB Bank Money transmission 28 Intermarket Bank Limited Money transmission Mobile payment services and money 29 MTN Mobile Money transmission services

Payment Systems Participants Services 1 Access Bank RTGS, PIC, DDACC 2 AB Bank RTGS, PIC, DDACC 3 African Banking Cooperation RTGS, PIC, DDACC 4 Bank of china RTGS, PIC, DDACC 5 Barclays Bank RTGS, PIC, DDACC 6 Cavmont Capital RTGS, PIC, DDACC 7 Citibank RTGS, PIC, DDACC 8 Ecobank RTGS, PIC, DDACC 9 Finance Bank RTGS, PIC, DDACC 10 First Alliance Bank RTGS, PIC, DDACC 11 First National Bank RTGS, PIC, DDACC 12 International Commercial Bank RTGS, PIC, DDACC 13 Indo Zambia Bank RTGS, PIC, DDACC 14 Intermarket Banking Corp. RTGS, PIC, DDACC 15 Investrust Bank RTGS, PIC, DDACC 16 Stanbic Bank RTGS, PIC, DDACC 17 Standard Chartered Bank RTGS, PIC, DDACC 18 United Bank for Africa RTGS, PIC, DDACC 19 ZANACO RTGS, PIC, DDACC