Introduction

Payment systems are key elements utilized to realize monetary and financial stability, serving as launch pad to implement the monetary policy activities through a reliable mechanism that guarantees policies are implemented efficiently and yield the desired results, and authenticated/documented processes for settling financial transactions are properly executed. Furthermore, they are key pillars of economic growth, as they are among the three main areas of Central Banks’ functions as defined by the Bank for International Settlements, viz. Implementation of Monetary Policy, Supervision and Oversight over Banks and Payment Systems. Payment systems involve many fundamental functions related to formulating the financial infrastructure that aids in realizing financial stability. Accordingly, the Central Bank of Kuwait constantly works to bolster the integrity and efficiency of these systems to stay abreast of ever-evolving payment services and instruments, with all that entails in terms of increasing volume and diversity of transactions. The aim is to ensure provision of secure and highly efficient payment services that accommodate the needs of the customers and earn their satisfaction through a set of means and procedures of financial payment and settlement based on an integrated and fortified infrastructure, to secure the integrity and efficiency of these systems and, hence, monetary and financial stability.
Payment systems are generally categorized as either Large-value Payment Systems (LVPSs) or Retail Payment Systems.

A) Large-value Payment Systems (LVPSs):

Also called Wholesale Payment Systems, these systems process urgent or large-value payments. Any system handling such payments must satisfy the requirements of efficiency and complete safety. Along these lines, Kuwait’s Automated Settlement System for Inter-participant Payments (KASSIP) was designed as a Real Time Gross Settlement System (RTGS) to handle participants’ high-value payments, as well as process their low-value or retail payments.

B) Retail Payment Systems:

These systems process a high volume of payments of relatively low value such as direct debit operations and credit card payments. Retail payment transactions can also be settled through the CBK and commercial banks, one example in Kuwait being the retail payments processed by Shared Electronic Banking Services Company (K-net).

The CBK operates and manages Kuwait’s Automated Settlement System for Inter-participant Payments (KASSIP) and Kuwait Electronic Cheque Clearing System (KECCS). Meanwhile, financial institutions (banks, financing companies, investment companies - financing activity – or exchange companies that are subject to CBK supervision or any institution authorized to carry out fund transfers or electronic payments within the constraints of laws in effect at the time) may also engage in electronic payment and settlement system activities, subject to the supervision and oversight of the CBK pursuant to Law No.20 of 2014 concerning electronic transactions, and may do so through service providers (EPIPs) or their agents (EPAs), defined as follows:

Electronic Payment Infrastructure Provider (EPIP):

Any financial institution that takes the form of a shareholding company, and has been listed in CBK register to perform all or part of the operations of electronic payment and settlement systems, provision of service or any other related services, provided the final settlement is made through local banks.

Electronic Payment Agents (EPA):

Any financial institution that takes the form of a shareholding company or limited liability company, and has been listed in CBK register to practice all or part of the activities on behalf of the Electronic Payment Infrastructure Provider.

Payment systems in the State of Kuwait are subject to laws currently enforced (such as CBK Law, Electronic Transactions Law) and to the bylaws, regulations, and special agreements signed among the parties concerned with the operation and provision of payment system services.