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Financial Services Africa Ghana Egypt Finance

Pan-African Payment and Settlement System

The PAPSS was formally launched in January 2022.  It is a centralized payment and settlement system for intra-African trade in goods and services.  Africa currently has approximately 42 individual currencies.  The PAPSS allows companies in Africa to pay for intra-African trade transactions in their local currency.  PAPSS is expected to reduce the costs, and accelerate the settlement and payment of, trade transactions.

Previously, African companies and their local banks used correspondent banks – often outside of Africa – to settle payments between two African currencies in a third, external currency, usually dollars or Euros.  The previous system also created foreign exchange and liquidity requirements for individual African Central Banks.  Considered by many to be a game changer for intra-African trade, PAPSS aspires to save businesses across the continent USD 5 billion in transactions costs each year.

The PAPSS was developed by the African Export-Import Bank in collaboration with the African Continental Free Trade Area (AfCFTA) Secretariat. It uses a digital, cloud-based platform developed by StoneX.  By facilitating the settlement of payments, PAPSS aims to support increased African trade under the AfCFTA.  African Central Banks oversee the governance and daily operation of the PAPSS, which is headquartered in Cairo, Egypt. PAPSS is only an exchange for legal tender, not digital assets like cryptocurrencies or Central Bank Digital Currencies.

Sending payments using the PAPSS involves the following steps: 1) a company issues a payment instruction to their local bank or payment service provider; 2) the bank sends instructions to their Central Bank, which sends it to PAPSS; 3) PAPSS validates the instruction and forwards it to the beneficiary’s Central Bank and then local bank; and 5) the local bank pays the transferred funds in local currency to the beneficiary.  

PAPSS operates by connecting the real time gross settlement (RTGS) systems of individual African Central Banks. On a daily basis, PAPSS settles the balance of all of the transactions among individual African currencies, netting them out prior to midnight.  Central Banks then resolve the remaining difference.  The payments and settlement process starts again from net zero the next day. 

In the first phase of PAPSS’ implementation, the Central Banks are connecting to leading local banks. PAPSS has reportedly already connected with 25 of the largest commercial banks on the continent, including banks such as Ecobank, Zenith Bank, and Standard Bank (aka Stanbic). In a second phase of PAPSS’ development, locally licensed fintech companies may gain access to PAPSS, allowing them to process trade-related transactions for intra-African trade, including on mobile platforms.  (In Ghana, banks and non-bank financial institutions – including savings and loans companies, fintechs, and mobile money platforms will be able to access PAPSS through the Ghana Interbank Payment and Settlement Systems Limited platform).  Further, PAPSS has signed a Memorandum of Understanding (MoU) with BUNA, the cross-border and multi-currency payment system owned by the Arab Monetary Fund (AMF). The MOU aims to eventually create interoperability between BUNA and PAPSS. 

For more information about PAPSS and the evolution of the financial services sector in Ghana, including supporting technology such as know your client, due diligence, and cybersecurity solutions, contact Commercial Service Ghana at; Tel: +233(0)30-274-1870.