This is a system of cheque clearing and settlement between banks based on images and associated electronic payment data, without the physical exchange of the cheques. It eliminates the traditional practice of transporting cheques from all bank branches countrywide to the automated clearing house using courier services but instead banks use telecommunications links between their branches to send the cheque data (images) for settlement.
The time it takes to transmit cheque data is drastically reduced, thus a faster clearing process, more accurate reconciliation of accounts and the reduction in paper work for both the clients and the banks involved thus reducing the possibility of cheque fraud emanating from cheque substitution. A faster clearing process leads to a faster clearing cycle (the number of days it takes for the cheque to clear ,for the payee to be able to access funds in his account) with the CTS a one day clearing cycle is achievable.
what is CTS compliant Cheque
These are the new cheque design that incorporate security watermarks as directed by the Kenya bankers association (KBA) issued to the customer in substitution to the old cheques. Among their most notable features are:
- One standard size across all banks- 4″ X7″ cheques will be issued by all banks.
- No alteration acceptable- if the drawer makes an error while drafting the cheque he will have to issue a new cheque leaf
- Use of dark inks -preferably black or blue
- Security feature- a KBA watermark is visible against the UV light in all cheques
How does CTS Work
On acceptance of a customer cheque deposit, the collecting bank takes an image of the cheque and reads in the magnetic ink character recognition (MICR) code line information from the cheque. This information together with the cheque amount is sent to the paying bank through the automated clearing house for settlement.
Any cheque returned unpaid will not be returned to the customers instead the collecting bank will issue an image return document to the payee, the document will contain the image of the cheque , the payment information and the reason for the return.
The security, non repudiation and authenticity of the data and image transmitted from the paying bank to payee bank is ensured using encryption and other inbuilt security techniques.