Yaw Oppong Antwi, a successful entrepreneur based in Adum, Kumasi, often faces frustration with cross-border transactions. Recently, while trying to process an urgent payment for a client in Nigeria, Yaw encountered significant challenges due to differences in compliance rules between Ghana and Nigeria. These hurdles necessitate involving third-party services, adding extra time and costs.
Yaw’s experience is not unique. Many African entrepreneurs like Portia Okyere and Mary Otubea, traders in Accra, also struggle with the limitations of existing payment systems, which hinder smooth transactions with suppliers and business partners across borders. Regulatory inconsistencies, high transaction costs, and limited financial interoperability continue to pose significant challenges.
A real-time infrastructure is needed to provide reliable and cost-effective solutions for instant payments. Thankfully, Africa has seen significant advancements in this area, driven by fintech innovations. Business owners can now make instant payments to suppliers and receive immediate confirmation, contributing to the growth and success of their enterprises.
Dr. Ernest Addison, Governor of the Bank of Ghana, highlights the transformative potential of e-payments for driving growth across the continent. “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.
Improving Africa’s payment infrastructure
To address the inefficiencies in cross-border payments, the African Export-Import Bank (Afreximbank), in collaboration with African central banks and the AfCFTA secretariat, established the Pan-African Payment and Settlement System (PAPSS).
PAPSS facilitates efficient and secure financial transactions across African borders and fosters financial integration in the region. The system includes membership from 14 central banks and over 50 commercial banks across countries such as Nigeria, Ghana, Liberia, and Kenya. PAPSS supports interoperable transactions, including retail payments and cross-border payments for capital markets infrastructure.
This platform enables real-time transactions using local currencies, reducing the need for currency conversions and minimizing exchange rate risks and fees. Businesses can make direct payments to suppliers, partners, or customers in other African countries via an intuitive online platform. While PAPSS has made significant progress, only a few African countries have achieved full interoperability. Dr.
Addison notes that legacy issues such as inadequate payment infrastructure, inconsistent regulations, limited policy coordination, user education, and concerns over security and fraud still pose challenges. To further develop the continent’s financial inclusion, 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.
Efforts must be made to scale up mobile interoperability, review legacy payment infrastructures, improve policy coordination, and foster public-private partnerships. New technologies such as cloud-based infrastructure and distributed ledger technology (DLT) should be leveraged to drive this transformation. As Africa continues to embrace digital innovations in financial systems, overcoming these challenges could unlock tremendous opportunities for growth and development across the continent.
