Payment system is a set of instruments, banking procedures and, typically, interbank funds transfer systems that ensure the circulation of money. Payment System plays 4 critical roles in any economy:
i. Financial Stability: There is a correlation between stability in financial markets and stability within the payment systems. Hence any failure to meet payment obligations leads to the erosion of confidence in the financial markets and the financial structure and any adverse development in a financial market or institution has a disruptive impact on the payment system operations.
ii. Monetary policy implementation: Implementation of Monetary Policy (market-based) depends on an active inter-bank money market, an efficient forecast of liquidity conditions in the economy, and a reliable and efficient Large Value Payment System (LVPS). Therefore, payment systems enhance the effectiveness of monetary policy tools used by the central bank.
iii. Economic Efficiency: Inefficient and unreliable payment systems can have an adverse impact on the economy which includes delays in settlement (weeks or months to receive credit), inconveniences (inability to finalize obligations in time or appropriately), opportunity costs (tied up funds not available in other productive sectors in the economy) and reputational impact (resort to informal arrangements).
Iv: Financial inclusion: Payment system includes various channels and instruments that facilitate people to access and use their money therefore providing for an entry point and facilitating platform for broader financial services and effective and competitive systems to reduce the cost of payment.
National Payment System is dynamic, market research is vital and central bank’s proactive role is vital as it is more concerned with the efficiency and safety of payment systems due to its impact to the economy and financial market.
Rwanda National Payment System went though much progress with introduction of various payment systems/services including RIPPS (Rwanda Integrated Payments Processing System), card based payment services both on Automated Teller Machines (ATMs) and Point of Sales (POS) terminals, new types of POS (such as mobile, QR, NFC), internet and mobile phone based payment services in addition to cash and paper based instruments like cheques and credit transfers.
NBR plays 4 roles in RNPS namely RIPPS operator, payment system regulator, overseer and catalyst for changes. Indeed, the National Bank of Rwanda (NBR) operates under the Law N°48/2017 of 23/09/2017 governing the National Bank of Rwanda in accordance with which the NBR has the responsibility to “supervise and regulate payment systems”. In addition, under the Payment System law, the Central Bank may "establish, own, operate and participate in the ownership or operation of payment, clearing and securities settlement systems". The law governing the holding and circulation of securities empowers the central bank to operate the CSD (Central Securities Depository.
With the purpose of promoting the continued development and modernization of the Rwanda Payment System, the guiding Strategy was approved by the Cabinet on 19th November 2018. Rwanda National Payment System (RNPS) Strategy serves as a guide for the Rwanda payment industry, including regulators, public and private sector players. It guides the Government of Rwanda and industry stakeholders to lead and contribute to the achievement of cashless economy in Rwanda
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