When it comes to making financial transactions, speed is becoming increasingly important. In our fast-paced world, instant payments are becoming the norm, and the global markets are taking notice. Cross-border payments are one area where instant payments can have a major impact. Traditionally, international payments can take days or even weeks to clear, but with instant payments, the process can be completed in just a few seconds. This not only saves time, but it also reduces the risk of fraud and other issues. As the global economy continues to become more interconnected, instant payments will become increasingly important. For businesses and individuals alike, the ability to make fast, convenient, and secure financial transactions will be essential.
As most readers know, we keep a close eye on developments in the faster (and instant) payment space, both the U.S. domestic as well as global markets. It has been a very active area of innovation during the past six years with dozens of new systems launched and more underway. This referenced posting is in the Paypers and summarizes an interview with the CEO of the Pan-African Payments & Settlement System (PAPSS). The system works through participating central banks, which hold pre-funded local currency settlement accounts with directly participating banks. The cross-border currency positions are net settled once per day (11 AM UTC).
‘At a time when cross–border trading is high on the Africa’s agenda, a single continental market makes it necessary for homegrown payment gateway to facilitate trade and investment. PAPSS was adopted in July 2019 in Niamey, Niger by the African Union Heads of State as the payment and settlement system to support the implementation of the African Continental Free Trade Area (AfCFTA). It is a Financial Market Infrastructure that has been developed and initiated through a collaborative effort of the AfCFTA Secretariat, Afreximbank and the African Union Commission. PAPSS is expected to create new financial flows and successfully facilitate trade and other economic activities among African countries.’
The interview summary goes through a number of topics if readers wish to link out to the posting. The system launched commercially in January of 2022 and currently has eight central banks and an unspecified number of commercial banks signed up. The ambition is to have all of the commercial banks on the African continent connected by end of 2025. Worth a quick read through for those keeping current with cross-border and instant payment initiatives globally.
‘As a new payment system, the key hurdles it faces are:
Acceptance and adoption – It’s always a challenge to move people from the ‘status quo’. It will take an appreciation of the value that PAPSS is bringing in terms of speed, low cost and guarantee of receipt of funds by the commercial banks and their being able to translate this to their customers doing cross border transactions. PAPSS is equipping its participants (today, commercial banks and in the future, fintechs) with the ability to articulate these benefits in a way that empowers their customers.
Adapting to new standards – PAPSS uses the latest standards in payments, ISO 20O22. While similar to the current standards, it will still require an adjustment to use these standards while the world migrates later this year. PAPSS is actively supporting its participants in this transition.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group