Pan African Payment And Settlement System (PAPSS) recently launched in Ghana after months of fine tuning the process is now live and operational in all African countries for processing of intra African trade payment in a centralised system.
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The Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, said that banks and financial institutions under its control will accept the Pan-African Payment and Settlement System (PAPSS) the governor recommended that businesses across Nigeria should key into payment structure for ease trade transactions across West Africa.
Speaking on the need for PAPPSS, Emefiele recalled that;
“Prior to the launch of PAPSS, settlements for Intra-Africa trade required a third currency and a non-African correspondent bank. This resulted in an estimated loss of close to $5bn annually and undermined trade in African countries. The launch of PAPPS gives fresh opportunities and aspirations for the African continent. It will simplify cross-border transactions, reduce third currencies for intra-African transactions and remove the need for correspondent banks and ultimately amplify Intra trade significantly,” he said.
These steps paints a picture on how PAPSS works;
- User sends a payment instruction denominated in their local currency to users bank or payment service provider
- Banks sends transactions instruction to the PAPSS system.
- Then PAPSS acknowledge receipt and verifies transaction instruction.
- The verified transaction instruction is sent to the receiver’s bank with acknowledgement to execute or stop the transaction.
- The User’s bank executes the transaction for the user in their local currency.
Experts say those who have settlement accounts with relevant central banks would issue direct credit instruction to initiate settlement on the real-time gross settlement (RTGS) systems of the central banks and the PAPSS.
Then, the RTGS credits the pre-funded account of the direct participant and alerts the PAPSS platform. The PAPSS, in turn, credits the clearing account of the direct participants. Indirect participants -those without RTGS account- must leverage sponsorship agreement to fund or defund their clearing accounts through the direct participants.
