PAPSS – African Cross Border Payment and Settlement is Now Available with Over 41 Known Currencies

The African Union, African Export-Import Bank (Afreximbank) and AfCFTA has inaugurated the Pan-African Payment and Settlement System (PAPSS) , thereby making it available for use by the public.

The commercial launch of PAPSS, which took place on January 13 in Accra, Ghana, virtually and physically, would ensures instant or near-instant transfers of funds between originators in one African country and beneficiaries in another.

PAPSS, the brainchild of Afreximbank, is a centralized payment and settlement infrastructure for intra-African trade and commerce payments. It is a cross-border financial market infrastructure enabling payment transactions across Africa, bridging trade challenges in a continent with over 41 known currencies.

The system will facilitate payments as well as formalize some of the unrecorded trade due to prevalence of informal cross-border trade in Africa.

It will also provide alternative to current high-cost and lengthy correspondent banking relationships to facilitate trade and other economic activities among African countries through a simple, low-cost and risk-controlled payment clearing and settlement system.

The benefits of PAPPS for cross-border payments include cost reduction; reduction in duration and time variability; decreasing liquidity requirements of commercial banks; decreasing liquidity requirements of central banks for settlement as well as its own payments; and strengthening Central Banks’ oversight of cross border payment systems.

Godwin Emefiele, governor of the Central Bank of Nigeria (CBN), says the pan-African payment and settlement system (PAPSS) will simplify cross-border transactions and reduce third currencies for intra-African trade. The third currencies include dollars, pounds and euro for cross-border transactions in Africa. Speaking at the event, Emefiele said the launch of PAPPS is a milestone reflecting collective efforts in building an infrastructure that enhances payment gateway across West Africa.

Whether shopping, transferring money, paying salaries, dealing in stocks and shares or making high-value business transactions, PAPSS’ real-time infrastructure provides a reliable, cost-effective answer for instant payments.

PAPSS works in collaboration with Africa’s central banks to provide a payment and settlement service to which commercial banks, payment service providers and fintechs across the region can connect as ‘Participants’.

At a time when cross-border trading is high on the agenda with the African Continental Free Trade Area (AfCFTA) agreement now a reality, PAPSS is primed to facilitate the expected increased volumes in cross-border payments.

How instant payments work

With Instant payment, participants no longer need to convert local currencies into hard currencies which then entailed the funds leaving Africa to be converted before being sent back again to the beneficiary bank – adding days to the transaction time.

In addition, compliance, legal and sanctions checks are performed instantly within the system. Near-instant payments process within 120 seconds.

How pre-funding works

Due to the speed of the real-time payment process, PAPSS needs to guarantee that funds are available to complete the originator’s transaction before effecting the movement of debits and credits between participants’ accounts. Participants must, therefore, agree to a pre-funding arrangement.

How settlement works

PAPSS needs to ensure prompt settlement within 24 hours. Net settlement across all participating central banks occurs at the same time – 11.00 UTC – each day.

As with the pre-funding process, notifications are carried via an ISO 20022 messaging system, notifying PAPSS, the Participants and RTGS of the status of every stage of the transaction.