One of Africa’s largest digital payments networks has just come aboard the Pan-African Payment and Settlement System (PAPSS); extending the network’s reach to over 320 million people across 35 African markets.
MFS Africa, one of the continent’s most established digital payments networks, has announced that it has joined the PAPSS network. The way the network works is by collaborating with Africa’s central banks. Together, they’ve created a centralised payment and settlement infrastructure, on to which African commercial banks, payment service providers and fintechs can join as ‘participants’.
By using this model, PAPSS is able to facilitate the payment, clearance and settlement for intra-African trade payments, aiming to increase intra-African trade and commerce by simplifying and reducing the cost of clearing and settling between African countries.
According to Afreximbank, the network’s initiator, over 80 per cent of African cross-border transactions originating from the continent’s banks are currently cleared and settled offshore, creating inefficiencies, and increasing the cost of African cross-border payments.
Supported by the African Union, PAPSS enables both payment and settlement to be made in the respective local currencies of the buyer and seller. It will also result in a reduction in the cost, administration and time taken to make cross-border payments, resulting in an estimated $5billion saving in transaction costs every year for Africa.
Digital cross-border trade using local currencies will enable more businesses to use formal, affordable and convenient channels for trade payments and collections; marking a new phase in driving the transformational potential of the African Continental Free Trade Area (AfCFTA).
Founder and CEO of MFS Africa, Dare Okoudjou, said: “Direct currency tradability and interchangeability removes many of the barriers to intra-African trade and investments, facilitates the natural directions of trade flows amongst African countries and regions, and makes borders matter less.”
Supporting this, the data of GSM Association (GSMA) highlights the importance of paytech infrastructure to the region, as 64 per cent of the $2.1billion transacted daily through mobile money platforms in 2020 happened in sub-Saharan Africa.
“This demonstrates how mobile money services play a key role in the economic growth of the continent and facilitate financial inclusion,” explains Mike Ogbalu III, CEO of PAPSS. “To that end, partnering with MFS Africa will open the way to millions more cross-border mobile money transactions and mark a new phase in driving the benefits of the AfCFTA.”
MFS Africa will extend the reach of the PAPSS network to over 320 million mobile money and last-mile users across 35 African markets, enabling borderless and seamless possibilities for transactions and trade. Mobile money and last-mile users – who are often underbanked semi-formal small and micro businesses trading across borders – stand to gain the most from this partnership.
“The Pan-African Payment and Settlement System will be the enabling infrastructure to spur the growth of intra-African trade and commerce, with the active participation of central banks, financial institutions, regional economic communities, the private sector and other stakeholders,” concludes Ogbalu III.