How the Pan-African Payment and Settlement System can enable Cross-border trade in Africa
The Pan-African Payment and Settlement System (PAPSS) is a cross-border, financial market infrastructure enabling payment transactions across Africa.
PAPSS seeks to address some gaps in cross-border trade. In effect, payment for transactions across Africa will be enhanced in the following ways:
- Pan-African payments – Leading-edge technology connecting African banks, payment service providers, and other financial market intermediaries enabling instant and secure payments between African countries
- Instant payments – Instant payments made by originators to beneficiaries in their local currencies, no matter where they are in Africa
- Simplified payments – Simplifying the historical complexities and costs of making payments across African borders, providing operational efficiencies that open up vast economic opportunities for all stakeholders.
The new pan-African payment system removes legacy complexities, including the cost of cross-border payments, bolsters operational efficiencies and sets a new path to more stable and stronger African currencies, and is set to spur intra-Africa trade.
For example, a Kenyan customer can now pay for a product from Ghana in Kenya shillings, while the trader receives payment for the goods in Ghanaian cedi, without troublesome conversion issues, following the official launch of the revolutionary payment system in Africa.
Effect on Cross-border Payment and trade
PAPSS seeks to address the historic challenges of making payments across African borders, adding value through a common African market infrastructure for all stakeholders, from governments, banks, and payment providers to corporates, small enterprises, and individuals.
The customer under PAPSS will experience instant payments of cross-border transactions without the hassle of currency conversion. Again, they will have improved working capital through payment certainty and faster transactions. They will also have access to various payment facilitating options through a growing network of financial intermediaries.
Governments and central banks partnering with PAPSS will benefit from enhanced financial inclusion opportunities and improved economic growth through intra-African trade. Besides, increased transparency of cross-border trade activity will bring greater oversight of cross-border transactions and increased potential to generate revenue. This will also ease the pressure on current accounts and demands for foreign exchange liquidity.
For commercial banks and other financial intermediaries, connecting to PAPSS will lead to a simplified process that reduces the costs and complexities of foreign exchange for cross-border transactions between African markets. PAPSS will provide an instant and secure cross-border payment capability to their customers across Africa whilst providing a simplified process that reduces the costs and complexities of foreign exchange for cross-border transactions between African markets.
“The commercial launch marks a significant milestone in connecting African markets seamlessly. It will provide a fresh impetus for businesses to scale more easily across Africa and is likely to save the continent more than $5 billion in transaction costs every year,” according to Chief Executive Officer of PAPSS Mike Ogbalu.
Compiled by: Felix Ampadu Anokwa CMILT, MCIPS, ACIB, MSc
Director, Commercial Jetstream Africa