• Payment Systems

Payment Systems

Overview

Payment systems refer to the rules, procedures, and mechanisms for transferring money between two or more financial institutions and their customers.

A national payment system is one of the principal components of a country’s monetary and financial system and is, therefore, crucial to a country’s economic development, since almost all economic transactions involve some form of payment.

Payment and settlement systems thus play a crucial role in a market economy, and central banks have always had a close interest in them as part of their responsibilities for monetary and financial stability. In light of this, Bank of Uganda provides a wide range of payment services for authorized financial institutions and the Uganda Government to facilitate the circulation of money in the economy.

National Payment System Department (NPSD) was created in 1998 to develop an effective, efficient and secure national payment system.

A properly functioning payments system among other things ensures distribution of liquidity in all sectors of the economy and allows transactions to be completed safely and on time.

Well-designed and managed payment systems help to maintain financial stability by preventing or containing financial crises, and help to reduce the cost and uncertainty of settlement, which could otherwise act as an impediment to economic activity. Payment and settlement systems therefore are to economic activity as roads are to traffic.

Consequently, an efficient payment system enhances the smooth and fast flow of funds for payment of goods and services.
Today, the emphasis is on electronic transactions with higher velocity.