(3 Minutes Read)
In a significant advancement for financial connectivity and intra-African trade, KCB Group in Kenya and the Bank of Kigali in Rwanda have officially incorporated the Pan-African Payment and Settlement System (PAPSS) into their operations. This integration is pivotal in the digital transformation of Africa’s financial services, allowing for faster, cheaper, and more secure cross-border transactions across the continent.
PAPSS was developed through a strategic partnership involving the African Export-Import Bank (Afreximbank), the African Union Commission (AUC), and the African Continental Free Trade Area (AfCFTA) Secretariat. It aims to eliminate dependence on third-party currencies and correspondent banks. By utilising local currencies and simplifying settlement processes, PAPSS is expected to significantly reduce transaction costs, shorten processing times, and improve the efficiency of cross-border payments in Africa.
Traditionally, cross-border transactions in Africa have faced challenges due to the necessity of intermediary currencies, usually the US dollar, and the involvement of numerous correspondent banks. This leads to higher costs, delays, and reduced transparency for businesses and consumers. PAPSS tackles these issues by providing a unified platform for direct settlements in local currencies, bypassing the longstanding barriers to intra-African trade.
The integration of PAPSS into the systems of KCB Group and the Bank of Kigali is likely to have extensive implications. For the first time, customers of these banks can easily send and receive payments across borders through their mobile applications and branch networks. This improved connectivity benefits individual consumers and significantly supports small and medium-sized enterprises (SMEs) eager to explore Africa’s vast market potential.
Initially piloted in 2022 within the West African Monetary Zone (WAMZ), PAPSS is now connected with 15 central banks, over 150 commercial banks, and 14 transaction switches. These switches ensure the platform remains efficient and reliable as it scales to meet rising demand.
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The successful expansion of PAPSS beyond its pilot phase underscores the increasing demand for modern payment solutions across Africa. Currently, only 16% of Africa’s total trade occurs intra-regionally, making the launch of PAPSS in Kenya and Rwanda a crucial step toward unlocking the continent’s economic potential. By reducing obstacles in cross-border payments, PAPSS is set to boost trade, promote economic growth, and enhance financial empowerment across various sectors.
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