Felix Thompson takes a closer look at the inner workings of one of the most significant financial platforms to have emerged from Africa in recent years, and which many hope will slash payment times and costs for traders across the continent.


After years of build-up and development, the African Export-Import Bank (Afreximbank) has formally launched a continent-wide system aimed at facilitating payment for goods and services in local currencies.

Known as the Pan-African Payment and Settlement System (PAPSS), the new initiative promises to transform cross-border payment, clearing and settlement processes, in turn offering a sizeable boon to intra-African trade.

In the past, African traders have been forced to use third currencies, such as the US dollar or euro, when executing payment across borders; a reliance that has come with high costs and long transaction times.

The new scheme, which Afreximbank is operating alongside the African Continental Free Trade Area (AfCFTA) secretariat, will remove the use of European or North American correspondent banks in cross-border payments.

Instead, a typical transaction will only require the participation of two African commercial banks, and their central banks, while Afreximbank will effectively act as a guarantor for the system.

“If a central bank has a temporary lack of liquidity for any reason, there is a standby overdraft facility from Afreximbank ensuring there is not a glitch in the system,” PAPSS deputy CEO John Bosco Sebabi told GTR earlier this year.

PAPSS will save Africa more than US$5bn annually in payment transaction costs, Afreximbank predicts, and play a “significant role” in supporting the rollout of the new FTA.

As the PAPSS management team works to onboard central banks and commercial lenders across Africa, GTR speaks to Mike Ogbalu, its CEO, about progress made to date and how the system will boost historically low levels of intra-African trade.


GTR: What were the reasons behind launching PAPSS? How will it impact intra-African trade?

Ogbalu: As a result of colonial times, Africa was balkanised into 55 different markets, each with utterly different rules of trade. Now, as part of the African Union’s Agenda 2063, we have designed what we call ‘the Africa we want”. A lot of those aspirations are captured within the AfCFTA, which attempts to create common trade rules among the 55 territories. Another crucial part of these plans is creating a pan-African payment system.

Because we have 42 different currencies on the continent, PAPSS aims to create a framework and system that allows participants across Africa to be able to trade amongst themselves, while leveraging each of their individual local currencies.

There are a lot of SMEs who only look to their own domestic market. We expect the emergence of PAPSS will allow a small entity, for example based in Abuja, to suddenly see the entire continent as a potential market as PAPSS takes care of how they receive payments from foreign counterparties.

We anticipate the scheme will lead to an acceleration of trade because we are reducing the payment time from seven days to as little as 120 seconds. Under the old system, companies had to source FX, or depend on a network of correspondent banking relationships – all of which had a negative impact on their costs.


GTR: How would the payment process work in practice for, say, a Kenyan company looking to export to another African country?

Ogbalu: If a Kenyan exporter is trading with a counterparty in Accra, Ghana, the exporter is able to invoice in Kenyan shillings, while the counterparty in Ghana is able to go to his financial institution and carry out the necessary payment documentary requirements, before instructing his bank to debit his account for the equivalent amount in Ghanaian cedi.

Once the PAPSS system is able to confirm the destination account is valid and the initiating bank is adequately funded, the money is forwarded directly into the beneficiary’s account in the destination location. At 11am every day there’s a settlement that takes place between the central banks on a net basis, and within 120 seconds, the beneficiary – the exporter in Kenya – will receive the value in their account, in Kenyan shillings.

Afreximbank has a key role as a settlement agent, with participating central banks maintaining a settlement position, or account, on the pan-African bank’s system. As such, Afreximbank handles the final movement of funds between the central banks.


GTR: How many commercial banks have started using PAPSS for live transactions?

Ogbalu: We have about 26 commercial banks fully onboarded to PAPSS, and we have a clear line of sight to onboard an additional 28, which are at different stages of signing off on their documentation.

Of those already onboarded, 90% have completed their technical integration, and they’re extending it to their mobile channels, their internet banking and, of course, making it available through their bank branches. About 20 of the commercial lenders will be formally launching the service in the coming weeks and making it available to their customers.

Six of these banks are in the West Africa Monetary Zone (WAMZ): Nigeria, Ghana, Gambia, Guinea, Sierra Leone and Liberia. Some are single banks in multiple countries, but in every single market we have a minimum of two to three banks that are ready to go live.

There are eight central banks now signed up to PAPSS: one in southern Africa, one in East Africa, and then the six WAMZ countries – where we conducted the initial pilot.

For now, central banks are the only users executing transactions on the network – and their use has tended to focus on specific types of transactions, such as making payments for their embassies and high commissions. But we expect live commercial bank transactions will start flowing on the platform soon.


GTR: What role do you envisage fintechs will have in developing PAPSS in the coming years?

Ogbalu: At the heart of our system is the instant payments offering, which allows users to clear and settle transactions in local currencies. On any payment, PAPSS also runs anti-money laundering, fraud detection and sanctions checks.

As PAPSS integrates more central banks and onboards more commercial banks, we are also seeking to involve indirect participants, such as mobile money ecosystems or card schemes. They, alongside participating banks, can create new products that will be layered on top of the PAPSS offering.

We have been working on our own solutions, such as for remittances. But I imagine we will also have ecommerce providers on the platform, akin to the likes of an Alipay, who are at liberty to come up with their own products on PAPSS.


GTR: What challenges is PAPSS facing in terms of driving adoption across the African continent?

Ogbalu: Central banks are generally very deliberative entities; they move at their own pace and enjoy significant political support. They are quite different from commercial actors. Regulatory backing for the PAPSS system has been improving significantly. PAPSS has been endorsed by African heads of state, and we are seeing increasing numbers of central banks coming onboard – even if they are not all moving at the same pace.

A previous challenge was that a number of players across Africa thought PAPSS would cannibalise investments and efforts they had made in the past, but PAPSS is not focused on cannibalising or replacing. We want to enable interoperability and guarantee a seamless service across the continent.