Pan-African Payment and Settlement System

The Pan-African Payment and Settlement System (PAPSS)

The Pan-African Payment and Settlement System is a cross-border, financial market infrastructure enabling payment transactions across Africa.

The Pan-African Payment and Settlement system is designed to revolutionize cross-border payments, making them faster, cheaper, and more secure than ever before.

The Pan African Payments Settlement System (PAPSS) is a joint initiative of the African Export-Import Bank (Afreximbank) and the African Union. It was created to address the challenges of cross-border payments in Africa, such as high costs, long processing times, and limited accessibility.

PAPSS is an electronic platform that facilitates the settlement of intra-African trade transactions in African currencies. It provides a centralized clearing and settlement system that enables financial institutions to easily process transactions in a timely and efficient manner.

  • Instant/near-instant payments of cross-border transactions without the hassle of currency conversion.
  • Improved working capital through payment certainty and faster transactions.
  • Access to various payment-facilitating options through a growing network of financial intermediaries

FAQs

What is PAPSS?

PAPSS, the Pan-African Payment & Settlement System is a centralized financial market infrastructure. It facilitates the payment for and settlement of intra-African trade of goods and services in multiple African currencies.

It is designed to effect instant payments in local currencies and use Central Banks or Commercial banks as settlement agents.

Who operates PAPSS?

Afreximbank (African Export-Import Bank) operates PAPSS as one of its initiatives to support the implementation of the AfCFTA (African Continental Free Trade Agreement) to boost intra-African trade.

When was it launched?

PAPSS was launched on the 13th January 2022 in Accra, Ghana.

Is PAPSS a fintech?

No, PAPSS is not a fintech. It is a centralised Financial Market Infrastructure.

How does it work?
PAPSS works through it’s Participants that include commercial banks and payment service providers such as mobile money operators. These Participants offer the PAPSS service to the end customer. For instance, a customer can walk into a bank or use mobile/online banking to initiate a PAPSS transaction. The transaction is initiated in the sender’s local currency and within 120 seconds the beneficiary will receive funds in their local currency. In order to enable instant payments across African borders in local currencies, PAPSS supports three core processes:
  • Instant payment: eliminates the need to convert local currencies into hard currencies, which took days to convert and send back to the recipient bank. System compliance, legal, and sanctions checks are also instantaneous – payments process takes up to 120 seconds. However, in Nigeria the National Regulator has decided that PAPSS transactions will be T+1 for inflows and outflows.
  • Pre-funding: before moving debits and credits across participants’ accounts, PAPSS must ensure that funds are available to execute the originator’s transaction due to the speed of instant payments. Thus, pre-funding is required.
  • Net settlement: instead of settling each bilateral transaction individually, PAPSS performs a multilateral net settlement. This means that PAPSS aggregates all incoming and outgoing transactions between settlement agents and simply settles the net position. This position is further deducted from the settlement account of the debtor and sent to the creditor.
What are the key benefits of PAPSS?
  • Instant Payments made in local currencies thereby domesticating intra-African trade payments.
  • Compliance, legal and sanctions checks are performed instantly within the system and payments are processed within 120 seconds.
  • Settlement is on a Multilateral Net Basis and agreed settlement currencies.
  • PAPSS Operates on a 24×7 basis.
  • PAPSS charges are less expensive than any current global payment system.
How PAPSS operates in a country or region?

For PAPSS to operate effectively in a given country or region, it must sign an agreement with the country’s or region’s Central Bank, which can either be a participant or play a supervisory role. Then, the commercial banks in the market integrate with PAPSS, allowing their customers to transact.

Fintechs currently have to link via commercial banks in order to utilize PAPSS.

Which countries can I presently send and receive money with PAPSS?

PAPSS is up and running in Nigeria, Ghana, The Gambia, Liberia, Guinea*, and Sierra Leone*. Integration is ongoing in Zambia, Zimbabwe, and Djibouti, while negotiations are in progress in other countries. The list of countries will be updated periodically.

 

What type of payments are supported on PAPSS?

PAPSS has been designed to support all types of cross-border transactions: low and high value payments, retail, trade, remittance, etc. However, each National or Regional Regulator will decide the type of transactions allowed in its market.

What’s the PAPSS journey thus far?
We are on a journey towards a single African market:
  • 2018: System development commenced and WAMZ agreed to Pilot with PAPSS.
  • 2019: Adoption and endorsement by the African Union Heads of State.
  • 2020: The Governing Structure of PAPSS is formed.
  • 2021: Operational rollout of PAPSS. Live transactions commence between West African Monetary Zone Central banks.
  • January 2022: PAPSS launched for commercial use.
  • September 2022: Commencement of customer transactions.
  • April 2023: Partnership with the ASEA (African Stock Exchanges Association) to facilitate and promote a more efficient payment and settlement of transactions of securities across borders to improve the overall landscape of securities markets in Africa.
  • June 2023: Introduction of the Commercial bank settlement model and partnership with 5 African Group banks to roll out PAPSS throughout their extensive subsidiary network on the continent.
Who sets the currency exchange rates? And how are the various counter parties settled for transactions?

The Central Banks set the exchange rate. The system allows central banks to set rates on a bilateral basis or against a nominated currency such as the USD or Euro. The PAPSS system at the level of the Central Bank calculates the NET Settlement position of every Bank.

How much will each bank set aside as reserve fund for settlement of trade transactions, or will this be posted into the current account of participating banks in CBN? Is this reserve fund in Naira or USD?

Guidance of how much will be determined by the central banks. Participants will provide reserve funds in local currencies to match their transaction which are originated in local currencies. Only the global net positions will be settled in a nominated settlement currency such as the USD at central bank level.

Will the rest of Africa be onboarded and when?

The Central Bank will provide this guidance.

How many Central Banks have signed on to this? and which countries do they cover/ relate to?

The focus has been on the WAMZ countries where we are conducting a pilot. However we have made significant progress with a number of other Central banks.

How do the banks determine the eligible and ineligible transactions?

This guidance will be provided by the central banks. PAPSS will not determine eligibility of transaction for participants

What are the transaction limits, limits enforcements and controls put in place?

This guidance will be provided by the central banks. PAPSS will not determine limits of transactions for participants.

Is CBN placing an upper limit to the amount that can be transferred through this platform with or without documentations or by an individual on a daily, weekly, monthly or annual basis?

The CBN will provide this guidance.

How we are going to ensure that only payments for eligible transactions are routed through this payment platform. E.g. how do we ensure that the payment is not for a CBN banned commodities?

Think of the PAPSS system like the SWIFT platform, SWIFT will not determine for banks which transactions are eligible. However PAPSS will put in place AML filters and match against important sanction lists. CBN is one of the pioneer Central Banks of the system and a very keen supporter. Therefore, a discussion with CBN needs to happen.  We can support in facilitating that discussion with CBN.

Some payments require documentations such as form A or M, invoices, NOTAPS etc. how are we going to ensure that these documents are in place before effecting payments?

The particular Bank will follow all its process and then send through the payment request after all the relevant documentation has been verified and approved by the Bank itself as is done today.

For further enquiries, kindly call our Trade help desk at 01-2807-228 or send an email to us at trade.services@ubagroup.com

FAQs

PAPSS is available to all UBA customers in Africa.

PAPSS supports transactions in all African currencies.

Transactions using PAPSS can be completed in a matter of hours, compared to traditional methods that can take days or even weeks.

Yes, PAPSS is highly secure and resistant to fraud.

For further enquiries, kindly call our Trade help desk at 01-2807-228 or send an email to us at trade.services@ubagroup.com