Banking vision aims at achieving twinning in KNET business model

KUWAIT CITY, May 1: The banking regulatory understanding to stop the project to establish a new payments company was accompanied by a banking vision aimed at achieving twinning in the KNET business model with the eight sub-projects that the Central Bank of Kuwait seeking to launch in two phases within the Kuwait National Payments System, reports Al-Rai daily. Following this it is believed there is a banking and regulatory understanding that has emerged recently, prompting the abandonment of the project to establish a new payments company similar to the Joint Automated Banking Services Company (KNET), provided that the banker continues to search for the best solutions to develop payment services ensuring that it is not interrupted locally even in the worst case scenario. The regulatory target payments system includes a group of integrated electronic payment systems that are compatible with international foundations and standards related to payment and settlement operations between the various participating entities. Its eight projects include automated clearing, wage protection, national clearing of payments through smart devices, in addition to the realtime system for total settlements, retail payments, electronic bill display and payment, financial claims management, digital currency, as well as quality control and oversight.

The sources indicated that the understanding between bank officials and the CBK in this regard was supported by more than one consideration, perhaps the most prominent of which are:

1. The business model of the current and prospective companies is similar to the extent of congruence, given that the KNET business model is broader and more comprehensive than just implementing financial payments.

Activities The sources indicated that if the company that was to be established goes ahead, it will be like copying the work of part of the activities of “KNET 1” in another under the name “KNET 2”, which weakens the relevance of the banking or even the regulatory need to establish a new financial payments company. .

2. The Banking Committee concerned with the establishment of a new company similar to “KNET” had previously chosen the international company “KPMG” as a consultant to prepare an advanced concept that regulates payments operations locally, and that is able to meet the requirements of comprehensive development targeted by the regulator and banks, It provides broader operational purposes for the company, which is expected to be a rival to KNET. After expanding the legal executive discussion in which bank officials participated, everyone concluded, according to the sources, that the objectives to be applied will be the same for the two companies. As long as KNET’s strategy includes moving to develop payments activities, and adding new activities that are not currently available in its business model and that are specified within the requirements of the payment system, it is not feasible to establish KNET 2.

3. The list of owners of the two companies is identical, as it consists of the same banks that contribute to “KNET 1”, which reinforces the conviction that the establishment of a new payments company increases the operating cost of banks without an urgent need, especially since the development plan of “KNET” is in line with the regulatory directives to enhance its ability to keep pace with the digital payment changes that have occurred globally, and takes into account the real challenges facing the banking industry.

4. The Central Bank succeeded during the last period in expanding the operation of financial technology companies with payment systems and others, as part of its strategy to expand the circle and scope of players in this field, which contributes to the diversification and development of payment services, noting that there are about 13 local companies that carry out the work of payment operators and others. This expands the field of competition in facilitating and operating payment services, and reduces KNET’s monopoly on these services.

5. KNET is the first company established in the Gulf to address issues of payments and settlements for banking services between banks, and several Gulf countries still rely on Visa and MasterCard to settle their payments, which makes this company operational privacy and broader hopes in developing its business model in line with the payments revolution.

6. The possibility of establishing a company with the same owners to oppose the requirements of the Competition Protection Authority Law. The sources noted that KNET will continue to develop the application of its business model, which is currently limited to “points of sale” and “ATM” as a gateway for payments to bank customers and settlements between banks, and will work to keep pace with the radical developments taking place in the world and represent a real challenge to the current banking and financial system related to “Fintech” in all its forms, especially in light of the entry of major technology companies into the line of providing cross-border banking and financial services that are not restricted by traditional regulatory systems.