Introduction

The payments system plays a very crucial role in any economy, being the channel through which financial resources flow from one segment of the economy to the other. However, payment systems are governed by a set of legislations and private contractual procedures. They include multiple memberships, common rules, and standardized procedures ensuring transmission, clearing, netting, and settlement of monetary obligations that would arise between members involved.

In the State of Kuwait, The Central Bank of Kuwait (CBK) operates the Real Time Gross Settlement System (RTGS) known as Kuwait  Automated Settlement System for Inter-participant Payments (KASSIP) and Cheque Clearing. The other payment systems such as retail payment and securities settlement systems are operated by the private sector ; namely:  Shared Electronic Banking Services Company (K-net) and Kuwait Clearing Company, respectively.

In operating the payment system, the Central Bank of Kuwait works closely with the local banking community to achieve an efficient reliable payment system, it also cooperates regionally with the Gulf Cooperation Council (GCC) Countries.


Large-value Payment Systems (LVPSs) : also called ''Wholesale Payment Systems'' which are designed primarily to process urgent or large-value payments. These payments are exchanged between financial institutions relation to financial market activities and are generally for large amounts and require urgent or timely settlement. Thus, a system handling such payments needs to meet high safety and efficiency standards. Some LVPSs also process a large number of low-value or retail payments, but the systems are designed primarily on the basis of the safety requirements for the processing and settlement of wholesale payments. Most LVPSs settle in central bank money. Large-value Payment Systems in Kuwait are presented by KASSIP, cheques clearing and security settlement that operate by Kuwait clearing company. KASSIP is type of large-value payment system of interbank payments which also process a large number of low-value or retail payment.

 

Retail Payment Systems: are designed to handle a large volume of relatively low-value payments, such as credit transfers, direct debits and card payments. Retail payment may settle in either central bank or commercial bank money. An example of Retail Payment Systems in Kuwait is ATM and point of sale (POS) that are operated by K-net.

 

Depending on their settlement methods, payment systems are divided into four design types with the most common form being Real-time Gross Settlement (RTGS) and Designated-time Net Settlement (DNS).

  • Real-time gross settlement systems effect the final settlement of individual payments on a continuous basis during the processing day and are the predominant form of LVPS. CBK has designed KASSIP based on this settlement method.
  • Designated-time net settlement systems settle the net positions of participants at one or more discrete pre-specified settlement times during the processing day. This is the main form of Retail Payment System, often with several settlement cycles during the day. Net Settlement LVPSs usually settle once at the end of the day.
  • Designated-time Gross Settlement systems exist in some countries. In these systems, the final settlement of transfers occurs at the end of the processing day with no netting of credit and debit position - i.e. on a transaction-by-transaction basis or on the basis of the aggregate credit and debit positions of each bank.
  • Hybrid Systems combine the features of gross and net settlement - e.g. frequent offsetting of transaction and frequent final settlement during the day.