Yaw Oppong Antwi is a highly successful and innovative entrepreneur based in Adum, a bustling commercial hub in Kumasi, Ashanti Region, Ghana. His thriving enterprise significantly contributes to the local economy and beyond.
Sitting in front of his large electronics shop, Yaw Oppong Antwi frantically taps away on his phone, trying to process an urgent payment for a client in Nigeria. However, completing the cross-border transaction is proving far more complicated than expected.
With sweat beading on his forehead, Yaw alternates between calling his bank and messaging his increasingly impatient Nigerian client.
“The payment system keeps rejecting the transfer. The bank says it is because of differences in compliance rules between Ghana and Nigeria. Now, I have to involve a third-party service, which will cost me extra time and money,” Yaw mutters.
Yaw’s experience mirrors the challenges faced by many African entrepreneurs, including Portia Okyere and Mary Otubea, both traders in Lapaz, Accra. As business owners, they rely on financial transfers to sustain their operations. Yet, the limitations of existing payment systems prevent them from conducting smooth transactions with suppliers and business partners across borders.
These struggles reflect the hidden challenges Africans face when dealing with cross-border payments. While regional trade in Africa continues to grow, regulatory inconsistencies, high transaction costs, and limited financial interoperability remain significant hurdles that entrepreneurs like Yaw must navigate daily.
Streamlining cross-border payments across Africa
A real-time infrastructure is needed to provide a reliable, cost-effective solution for instant payments, whether for shopping, transferring money, paying salaries, trading stocks, or making high-value business transactions.
Thankfully, in recent years, Africa has seen remarkable growth in cross-border payment systems. This growth is driven by a combination of increased regional trade, rapid digital transformation, and groundbreaking innovations in financial technology (fintech). As a result, business owners importing goods from Nigeria can now make instant payments to suppliers and receive immediate confirmation. This allows goods to arrive promptly and contributes to business growth and success.
Dr Ernest Addison, Governor of the Bank of Ghana, believes that e-payments hold immense potential for driving growth across the continent. As payment methods become more convenient and scalable, and supportive infrastructure develops, e-payments could become a major growth pole for Africa.
“A strong and well-regulated African financial infrastructure could deepen the benefits of intra-regional trade, eliminate the use of third currency for settlement, improve liquidity management of firms, and reduce transaction costs,” Dr Addison explains.
He further stressed that the Pan-African Payment and Settlement System (PAPSS), an initiative of the African Export-Import Bank (Afreximbank), offers an ideal solution for facilitating efficient and secure financial transactions across borders.
“In recognition of the need to promote efficient intra-Africa trade by minimising frictions in cross-border payments, Afreximbank, in collaboration with other African central banks and the AfCFTA secretariat, established the Pan-African Payment and Settlement System (PAPSS) to enable efficient and secure financial transactions across African borders and to contribute to financial integration across the region.”
The Pan-African payment and settlement system
PAPSS was established to facilitate efficient and secure financial transactions across African borders and foster financial integration within the region. The system’s membership includes 14 central banks from countries such as Nigeria, Ghana, Liberia, Guinea, Gambia, Sierra Leone, Djibouti, Zimbabwe, Zambia, Kenya, Rwanda, Malawi, Tunisia, and Comoros, as well as over 50 commercial banks.
The PAPSS initiative supports interoperable transactions, including retail payments through partnerships between indirect participants such as electronic money issuers and direct participants like commercial banks, as well as cross-border payments for capital markets infrastructure.
This platform offers a seamless and efficient solution for cross-border payments. It enables real-time transactions using local currencies, eliminating the need for currency conversions and reducing exchange rate risks and fees. Businesses can make direct payments to suppliers, partners, or customers in other African countries via a simple and intuitive online platform.
Dr Addison believes the PAPSS platform holds great potential for the scalability of mobile money interoperability across the continent. It provides a platform that encourages innovation in cross-border trade.
Regulatory bottlenecks
While PAPSS has made significant progress since its establishment, the challenge remains that only a few African countries have achieved full interoperability. This limits the ability to fully maximise the opportunities presented by the PAPSS platform in scaling mobile money interoperability.
Dr Addison noted that cross-border payments continue to face challenges due to legacy issues, including inadequate payment infrastructure, inconsistent regulations, limited policy coordination, lack of user education, and concerns over security and fraud.
“The challenge, however, is that only a few African countries have achieved full interoperability, which limits the ability to fully maximise the opportunity presented by the PAPSS platform in scaling mobile money interoperability. This brings up pertinent legacy challenges that need to be addressed in this direction, prominent among which are inadequate payment infrastructure and inconsistent compliance, status of the regulatory frameworks, policy coordination, user education and security and fraud concerns.”
The way forward
To achieve a major leap in the continent’s financial inclusion index, African countries must leverage their youthful and technologically savvy population to shape the future of payments. This will drive financial inclusion, foster intra-trade activities, and promote overall economic growth.
Dr Addison has specifically urged the scaling up of mobile interoperability across African nations, which would require reviewing legacy payment infrastructures, improving policy coordination among member countries, and fostering effective public-private partnerships. Additionally, new technologies, such as cloud-based infrastructure, distributed ledger technology (DLT), and regulatory sandbox initiatives, should be leveraged to drive this transformation.
This report is produced by Frank Addo Aboagye under the DPI Africa Journalism Fellowship Programme of the Media Foundation for West Africa and Co-Develop.
