Malawi is the first in Africa to install a full truncation electronic clearing house solution in Africa. The solution was implemented by NCR Corporation in conjunction with Sybrin.

NCR in conjunction with Sybrin has deployed the first fully truncated national clearing system in Africa, involving nine national banks, and the Reserve Bank of Malawi. NCR is involved in the capture of list solutions are built to export images and data as requested by system users over a variety of information delivery channels that range from dedicated LANs to the Internet. Because the images are just as clear as the actual cheques (and much easier to access) there is no need to process, file, store, or microfilm the paper cheques.

Cheque image archive systems can be at the heart of a financial institution's integrated, enterprise transaction imaging platform. The ability to integrate prime pass image capture and delivery systems with a cheque image archive solution positions financial institutions to clear and settle their payments through cheque image exchange. With images captured remotely, truncation of the paper cheque at the earliest point of the process can become a reality and the revenue from the paper cheque product can be maintained and enhanced.

This article describes the vision and objectives of the project, awarded by the Bankers Association of Malawi to a consortium made up by NCR Corporation, NCR Office Equipment Centre (Gestetner Ltd) and Sybrin Software. This vision of the project is described in the following statement:“to implement a simple, robust, secure, cost effective and centralized electronic cheque clearing system (ie code line clearing) for Malawi, in order to benefit the Government, the Reserve Bank of Malawi, the commercial clearing banks and the public.

Objectives: The ECCH awarded the project to the NCR / Sybrin consortium after an exhaustive tender process. The consortium won the bid after it demonstrated its ability to deliver all the required functionality at an affordable value. This “state of the art” image and code-line capture solution will enable the ECCH to achieve the following business goals and objectives of the individual member banks:

-Meet Cheque Clearing deadlines;To Reduce excessive cash usage and holdings; Achieve security and finality transfer of value through payment systems; Enhance confidence in the usage of cheques; To control system risk and achieve a reliable, secure, integrated payment, clearing and settlement system; Improve processing efficiency;Reduce float, speed up circulation of funds, and increase efficiency in funds transmission; Enable faster resolution of queries;Enable easy accessibility of information;Enable easy integration with the Retail System; Provide electronic images and code-line data for down-stream reporting requirements; Centralize system maintenance and support through a “Response Centre”; Increase system uptime, especially during peak processing times;Implement a reliable and fault tolerant disaster recovery plan;Put in place a reliable and fault tolerant hot backup procedure for the system Continuously add value to the Group’s lines of business;Achieve consistent improved returns for the shareholders.

Cutting Down On Cheque Handling: The sorting, balancing, bundling, and delivery of paper cheques for clearing and settlement is an expensive and labour-intensive process. In the United States, the Federal Reserve estimates that in paper form, cheques are handled an average of 12 times, whilst with imaging, cheques are handled just once. Cheque imaging, coupled with cheque image exchange, offers numerous benefits to financial institutions, including speedier cheque retrievals, reduced costs, and less risk of fraud. Prior to implementing the new solution, cheque clearing between banks in Malawi had a labour intensive process, prone to error, exposing participating banks to a much greater element of risk.

Previous Manual Environment: In-clearings Items are exchanged at the Reserve Bank of Malawi. The instruments are accompanied by itemized listings including totals. Unauthorized items have to be physically located, and the reason for rejection written on the cheque, prior to the item being prepared for return to the bank of deposit. Physical items have to be forwarded for a manual process of technical verification, signature verification and posting verification. This can take several days. All erroneous entries are located, reversed and returned. At the moment all clearing is done manually at the reserve bank.

Previous Manual Environment Out-clearings: Instruments have to be collected from branches; All items are manually separated by the teller; All items have to be manually posted on the existing POD system.

Strategic Requirements: ECCH needed an information technology platform that was flexible enough to support changing business needs. The software architecture to be implemented had to be designed in order to meet that goal.

Technical Requirements: The archive system had to be able to support the storage of the useful information derived from the Magnetic Ink Character Recognition (MICR) system; The system had to have the ability to compress, encrypt and decrypt files received from the participating banks; The system had to be based on client/server architecture, using Microsoft Windows 2000 as the base operating system; The solution had to be able to process, at a minimum, the following volumes: 15 000 items per day Outward Clearing, and 15 000 items per day Inward Clearing The system was designed to make use of the existing “MALSWITCH” network for both the upload and download of files to and from the system; The system had to be the initiator of both the upload and the download of any information

Cheque Image Exchange Technology and the Future: It is NCR’s goal to rid the banking system with much of the cumbersome manual work and to feed cheque images from a depositing institution, separating the exchangeable items, delivering them to payor institutions, and delivering the "all items” file to an archive provider, which in the case of the this solution will be a National Archive.

Using imaging technology provides other benefits too: early cycle identification of fraudulent items provides notice to depositors the next day; not next week. Return cheques are received on the day they are returned so that the institution can react quickly and minimize loss, and most importantly, financial institutions can slash huge amounts from non-earning assets through NCR’s dramatically shorter collection cycle.

Downstream Benefits: Over and above the benefits identified in the objectives of the project mentioned earlier, it is anticipated that the following additional downstream benefits will be realised from the implementation of the system: Allow member banks to effectively manage customer services; Allow member banks to effectively manage delivery channels; Motivate staff by enhancing and streamlining the cheque handling process; Facilitate the review of procedures and workflows, enhancing and improving where required; Facilitate the review of job roles, freeing staff from mundane manual tasks, and allowing them to carry out more customer facing roles; Provide greater understanding of specific business, technical and operations training requirement and needs. Further information about this project can be obtained through NCR Office Equipment Centre by emailing ncr@inet.mw