· The political, financial, and Fintech leaders from across the African continent joined in a virtual event recently to launch the Pan-African Payment and Settlement System (PAPSS) in Accra, Ghana.
· PAPSS is designed as a cross-border, financial market infrastructure instantly connecting payment transactions across Africa.
The political, financial, and Fintech leaders from across the African continent joined in a virtual event recently to launch the Pan-African Payment and Settlement System (PAPSS) in Accra, Ghana.
PAPSS is designed as a cross-border, financial market infrastructure instantly connecting payment transactions across Africa. The new system enables a buyer to pay in his national currency while the seller will receive the payment in his local currency, making the transaction more cost-effective, fast, and efficient. According to sources, the new system supports three core processes: instant payment, pre-funding, and net settlement.
Under the instant payment, participants need not convert local currencies into hard currencies and then send them back leading to delay and exchange losses. Additionally, compliance, legal, and sanctions checks are performed within the system and it is claimed that the process can be completed within 120 seconds. The pre-funding agreement ensures that funds are available to complete the originator’s transaction before affecting the movement of debits and credits between participants’ accounts. The PAPSS also has to ensure prompt settlement within 24 hours and the Net settlement across all participating central banks occurs at the same time – 11.00 UTC – each day. For both the pre-funding process and the net settlement process, notifications about every stage of the transaction are carried through an ISO 20022 messaging system.
The significant features of PAPSS instant payment include instant and irrevocable credits to customer accounts; immediate confirmation to both originator and beneficiary; service availability 24/7, 365 days a year; ISO 20022 global message standard allowing interoperability, large data sets and rich data for payment and remittance information; and secure infrastructure, incorporating cyber-security and payment fraud systems.
Afreximbank and the African Continental Free Trade Area (AfCFTA) are the lead promoters of PAPSS. Experts say that the payment system will benefit all stakeholders including governments, banks, and payment providers to the end customers; corporates, small enterprises and individuals. It eliminates the challenge of dealing with 42 different countries and 4 exchange systems. The scheme is expected to save banks on the continent some $5 billion in transaction fees.
The commercial launch came after a successful trial run of the mechanism in a pilot project in the West African Monetary Zone (WAMZ) consisting of six countries – Gambia, Ghana, Guinea, Liberia, Nigeria and Sierra Leone.
