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.
The orderly and efficient functioning of the Payment Systems contributes to the financial and economic stability, provides a platform for monetary policy activities by providing effective and efficient transmission of monetary value and ensuring efficient and cost effective discharge of claims and liabilities arising out of economic transactions, and hence are partners in economic growth.
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 to authorized financial institutions and the Uganda Government to facilitate the circulation of money in the economy.
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