KCB Group has signed a deal with the Pan-African Payment and Settlement System (PAPSS) that is set to improve cross-border transactions across Africa. The deal was signed during the Afrexim Bank Annual Meeting in Ghana. This deal makes KCB the first bank in East Africa to join this financial market infrastructure. KCB says this move aims to enhance the speed, affordability, and reliability of transactions.
The agreement establishes a centralized Financial Market Infrastructure that has been developed in partnership with the African Export-Import Bank (Afreximbank). This platform is designed to support trade within the Africa Continental Free Trade Area (AfCFTA). It offers an alternative to the current costly and time-consuming correspondent banking relationships.
By offering a streamlined, low-cost, and risk-controlled payment clearing and settlement system, it enables seamless trade and economic activities between African countries.
KCB Group CEO, Paul Russo, expressed excitement about the advantages this partnership will bring to their customers. With over 120 years of payments and collections expertise, KCB will provide its clients with access to a wide range of economic opportunities facilitated by the new platform. These opportunities include enhanced efficiency in conducting intra-African trade payments.
Key benefits of the Pan-African Payment and Settlement System include:
- Reduced Duration and Variability: Cross-border payments within Africa will experience shorter processing times and decreased variability, leading to faster transactions and improved trade efficiency.
- Real-Time Payments: The platform enables real-time payment processing, facilitating quicker access to funds for businesses engaged in cross-border trade.
- Decreased Liquidity Requirements: Commercial banks will require less liquidity for cross-border payments, which can be redirected to other areas of their operations, fostering increased financial stability.
- Removal of Transaction Value Limits: The platform eliminates transaction value limits, allowing businesses to conduct larger transactions without restrictions, thereby encouraging growth and expansion.
- Exchange Rate Autonomy: Commercial banks will be empowered to set their own applicable exchange rates, providing greater flexibility and control over currency conversions.
- Strengthened Oversight: The platform enhances the oversight of cross-border payment systems by Central Banks, ensuring increased security and compliance.
The Pan-African Payment and Settlement System network currently has eight Central Banks, 28 commercial banks, and six switches. Having undergone successful pilot testing in the West African Monetary Zone, the platform is set to expand across all five regions of Africa by the end of 2023. The end goal is to onboard all African Central Banks by the end of 2024 and ensure the participation of all commercial banks by the end of 2025.