The long awaited Pan-African Payments and Settlement System (PAPSS) was launched Thursday, January 13, in Accra, Ghana, in a virtual event under the theme: “Connecting Payments, Accelerating Africa’s trade.” The new system allows a buyer in one African country to make a payment in his or her national currency and the seller in another country receives payment in their local currency. Its commercial launch came after a successful pilot in the West African Monetary Zone (WAMZ) region. The WAMZ is a West-African economic and integration body with six countries – Gambia, Gambia, Ghana, Guinea, Liberia, Nigeria and Sierra Leone. According to Prudence Sebahizi, the Chief Technical Advisor at the AfCFTA Secretariat, the new system will allow a customer or a buyer to make payment in a national currency and the seller will receive the payment their own currency. This, he noted, is way easier and less costly than changing the Kenyan shilling to the US dollar and then converting the US dollar to the Ghanaian cedi, as has been the case. Emmanuel Sesonga, the director of business development at Herbmadz, a Rwandan holdings company that specializes in different sectors including IT and breweries, welcomed the initiative. Sesonga said: “It’s a good initiative for us who are planning to tap into the continental market by exporting our products. “We are also planning to open in different African countries and I hope that with these kind of systems, it eases doing business not only for us at Herbmadz but also others in the business community.” In order to enable instant payments across African borders in local currency, a document available online indicates that the new system supports three core processes: instant payment, pre-funding and net settlement. How instant payments work With instant payment, participants no longer need to convert local currencies into hard currencies which then entailed the funds leaving Africa to be converted before being sent back again to the beneficiary bank – adding days to the transaction time. In addition, it is noted, compliance, legal and sanctions checks are performed instantly within the system. Near-instant payments process is done within 120 seconds. How pre-funding works Due to the speed of the real-time payment process, it is noted, the system needs to guarantee that funds are available to complete the originator’s transaction before effecting the movement of debits and credits between participants’ accounts. Participants must, therefore, agree to a pre-funding arrangement. Direct participants integrate directly with PAPSS and the real-time gross settlement (RTGS) systems of central banks in the pre-funding process. Participants without an RTGS account – indirect participants – are able to fund or defund their clearing accounts on the system with the aid of a direct participant providing the required liquidity. Notifications are carried via the ISO 20022 messaging standard, notifying PAPSS, the participants and RTGS of the status of every stage of the transaction. How settlement works The Pan-African Payments and Settlement System needs to ensure prompt settlement within 24 hours. Net settlement across all participating central banks occurs at the same time – 11.00 UTC – each day. As with the pre-funding process, notifications are carried through an ISO 20022 messaging system, notifying PAPSS, the participants and RTGS of the status of every stage of the transaction. As noted, the system’s core service is provided by its instant payment system (PIP™), and supports wholesale and retail real-time payments and the connectivity of banks and payment service providers. Key features of PAPSS instant payment are: instant and irrevocable credits to customer accounts; immediate confirmation to both originator and beneficiary; service availability 24/7, 365 days a year; ISO 20022 global message standard allowing interoperability, large data sets and rich data for payment and remittance information; and secure infrastructure, incorporating cyber-security and payment fraud systems underpinned by behavioral analytics and machine learning capabilities.