1. COMPONENTS OF A PAYMENT SYSTEM

2. They include: Banks and Financial Institutions: banks, post office savings banks, building societies, mortgage finance companies, forex bureaus and co-operative societies (SACCOS). Customers: individuals, companies, organisations, institutions, governments, etc. Payment and Settlement Systems: represent the various processes and channels undertaken to realise the exchange of values between the transacting parties. Payment Instruments and Streams: consist of cash, cheques, debit and credit cards, ATM cards, postal and money orders, Electronic Funds Transfers, Electronic Funds Transfer Point of Sale (EFTPOS), smart cards and vouchers. Clearing instruments: cheques, Electronic Funds Transfer (EFTs) and both direct credits and debits.

3. Legal and statutory framework and Rules, Regulations and Agreements: govern the rights, duties and obligations of the participants in the system. Providers of access to payment related services: e.g. Information Technology Solution Providers, SWIFT (Society for Worldwide Interbank Financial Telecommunications), etc. Infrastructure: These are systems processes and procedures. They support the functioning of the payment systems and consist of telecommunication, power and transport systems.

4. STAKEHOLDERS IN A PAYMENT SYSTEM

5. This includes everyone that has an interest in the payment system. This interest can be through ownership, use or service provision to any component(s) of the system. The stakeholders include: Central Banks Banking Industry Infrastructure Providers e.g. Automated Clearing House, International Card Operators e.g. VISA, transaction switches. Service Providers and End-Users/Customers (Individuals and companies). Regulatory Bodies and Government. International Monetary bodies such as Bank for International Settlements (BIS), International Monetary Fund (IMF), etc.

6. STAKEHOLDERS IN A PAYMENT SYSTEM CONTD FINANCIAL INTERMEDIARIES THAT PROVIDE PAYMENT SERVICES IN KENYA Credit institutions Commercial Banks, Non-Bank Financial Institutions, Mortgage Finance Companies, Forex Bureaus, Building Societies, Insurance companies, SACCOs Specialised Financial Institutions, E.g. Agricultural Finance Corporation, Agricultural Development Corporation, Industrial and Commercial Development Corporation, Kenya Industrial Estates, and the Industrial Development Bank among others. Other institutions Pension schemes (e.g. NSSF) The Post Office

7. STAKEHOLDERS IN A PAYMENT SYSTEM CONTD THE ROLE OF CENTRAL BANK The Central Bank of Kenya Act empowers it to "promote smooth operation of Payments, Clearing and Settlement Systems". The CBK participates in the payment system in the following ways: As a user of payments system: The Central Bank has its own transactions to carry out requiring the movement of funds. As a member of payments system: It is both a member and supervisor of the Clearing House. As a provider of payments system: The Central Bank of Kenya provides clearing and settlement services on a net-multilateral arrangement at the Nairobi Clearing House. This is done on behalf of Kenya Bankers Association (KBA). As a guardian of public interest: Acting as a systems regulator, arbitrating in the event of complaints and handling compensation procedures. As a facilitator of daily settlement: This involves facilitating commercial banks’ obligations arising from their payment system activities by using their centralised settlement and clearing accounts domiciled at Central Bank. As an Overseer of Payment Systems: The Central Bank has formal authority relating to the supervision of payment system. This is in keeping with Central Bank Responsibility No. 3 of the BIS Core Principles for Systemically Important Payment Systems.

8. STAKEHOLDERS IN A PAYMENT SYSTEM CONTD BANKING ASSOCIATIONS AND GROUPINGS The following groups, committees and associations are involved in the National Payment System in Kenya. Kenya Bankers Association: An association of banks that safeguards and raises matters of common interest with regulators and government. It works through various sub- committees. The Clearing House: Owned by Kenya Bankers Association, its membership is limited to licensed banks including CBK. It is managed by CBK on behalf of KBA. Its main role is to facilitate settlement of clearing instruments such as, cheques, EFTs, Direct debits and credits. Kenya Swift User Group: This is a committee of SWIFT users in Kenya. National Payments Systems Operations Committee NPS Technical Committee