Introduction
The Pan-African Payment and Settlement System (PAPSS) is revolutionizing the landscape of cross-border payments in Africa. Launched by Afreximbank in collaboration with the African Union and the AfCFTA Secretariat, PAPSS is operational in 18 African countries. It connects banks, payment service providers, and national switches, enabling instant, secure, and cost-effective payments in local currencies. As we explore the current state of PAPSS, we will assess both the opportunities it presents for financial institutions and the regulatory and compliance challenges they face.
Regulatory & Compliance Landscape
Current Regulatory Frameworks
PAPSS operates within a complex multi-jurisdictional regulatory environment, interfacing with local central banks, financial regulators, and adhering to international standards. Its infrastructure is ISO certified, ensuring compliance with global regulatory benchmarks, including stringent KYC and AML protocols. This adherence is crucial as PAPSS integrates with digital channels and fintechs, requiring alignment with varied local licensing and operational standards.
Compliance Challenges for Correspondent Banks
Financial institutions face significant challenges due to fragmented regulatory regimes across African countries. Each nation maintains unique licensing, reporting, and compliance requirements, complicating cross-border operations. The historical reliance on external currencies for African cross-border payments has been mitigated by PAPSS, which facilitates direct local currency settlements. However, banks must still navigate local FX regulations and documentation requirements.
KYC/AML Infrastructure Requirements
Centralized and harmonized KYC/AML protocols are essential for banks participating in PAPSS. Financial institutions must implement robust customer due diligence, transaction monitoring, and reporting systems capable of operating across borders and regulatory frameworks. Additionally, compliance with diverse local data protection laws is critical to manage cross-border data flows effectively.
Institutional Perspectives
Correspondent Banking Pain Points
Traditional correspondent banking in Africa is often associated with high costs and operational complexity due to multiple intermediaries and FX conversions. PAPSS addresses these challenges by offering direct, instant settlement in local currencies, significantly reducing costs. Furthermore, its near-instant settlement capability enhances transparency and improves the customer experience.
Large-Value Transfer Challenges
Managing liquidity across multiple currencies and jurisdictions remains a challenge for banks, often resulting in delays and trapped capital within the legacy correspondent model. Regulatory reporting requirements for large-value transfers add further complexity, necessitating enhanced due diligence and compliance efforts.
Multi-Currency Account Management Needs
Financial institutions require integrated platforms capable of managing balances, settlements, and reconciliations in real-time across multiple African currencies. Effective FX risk management is crucial as PAPSS expands to include more volatile currencies, presenting opportunities for banks to develop sophisticated hedging strategies.
Banking Partnership Opportunities
PAPSS enables the establishment of direct correspondent relationships with institutions across Africa, bypassing traditional global networks. Banks can also collaborate with fintechs and PSPs to offer PAPSS-enabled services to new customer segments, including SMEs and digital-first businesses.
Market Data & Trends
SWIFT Network Statistics
While SWIFT remains the dominant network for international payments in Africa, its share of intra-African payments is declining as PAPSS adoption grows. Historically, over 80% of cross-border payments in Africa involved external currencies, but PAPSS facilitates direct local currency settlements, eliminating the need for such conversions.
High-Value Transfer Volumes and Patterns
Participating banks have reported transaction volume surges of over 1000% through digital channels since joining PAPSS. This rapid adoption reflects increased demand for instant, low-cost cross-border payments and has resulted in cost savings of up to 27% for end users.
Wealth Management Payment Flows
Wealth managers and asset managers are increasingly leveraging PAPSS for portfolio transfers and client payments, benefiting from faster settlement and reduced FX costs. As network expansion continues, PAPSS’s role in facilitating wealth management payment flows is anticipated to grow.
Institutional Adoption Metrics
As of October 2025, PAPSS operates in 18 countries, with 15 financial institutions and 14 national switches connected. The integration with national switches is critical for scaling adoption, enabling seamless connectivity between banks, PSPs, and other market participants.
HNWI & Institutional Use Cases
Wealth Manager Requirements
High-net-worth individuals and their advisors require instant settlement and real-time confirmation for cross-border investments, property purchases, and lifestyle payments. The ability to transact in local currencies without reliance on external FX markets is a significant advantage.
Asset Manager Cross-Border Needs
Asset managers require efficient, compliant mechanisms for moving capital across borders to support fund operations, investor inflows, and redemptions. PAPSS offers the necessary infrastructure to meet these needs while ensuring regulatory compliance.
International Sports Organizations
Sports federations and clubs benefit from fast, transparent payment rails for distributing sponsorship funds, prize money, and salaries to athletes and partners across Africa. Major events generate large, time-sensitive payment flows that are well-served by PAPSS’s capabilities.
Commodity Trade Settlement
Commodity exporters and importers can settle transactions in local currencies, reducing FX risk and improving cash flow. Faster settlement supports just-in-time inventory management and reduces working capital requirements.
Technology & Infrastructure
Payment Rail Comparisons
| Feature | PAPSS | SWIFT | Regional Switches |
|---|---|---|---|
| Settlement Speed | Instant (≤120 seconds) | 1–3 days | Varies |
| Currency Support | Local African currencies | Primarily hard currencies | Local/regional currencies |
| Cost | Low (up to 27% savings) | High | Moderate |
| Compliance | ISO certified, local KYC/AML | Global standards | Local standards |
| Integration | API, national switches | SWIFTNet, proprietary | Varies |
Multi-Currency Platform Capabilities
PAPSS enables real-time, multi-currency settlement, allowing participants to send and receive payments in their local currency, with automatic conversion at competitive rates. The PAPSS African Currency Marketplace, launched in 2025, enhances liquidity and price discovery for African currencies, reducing reliance on external FX markets.
24/7 Operational Requirements
PAPSS is designed for 24/7 operation, supporting instant payments and real-time settlement, a critical requirement for modern banking and wealth management clients. Its architecture incorporates advanced cybersecurity protocols to ensure operational continuity and data protection.
Banking Integration Standards
PAPSS offers standardized APIs for seamless connectivity with bank core systems, digital channels, and national payment switches. Its design supports interoperability with existing financial market infrastructure, accommodating both legacy and next-generation payment systems.
Strategic Banking Perspectives
Correspondent Banking Network Evolution
PAPSS reduces reliance on global correspondent banks for intra-African payments, enabling direct settlement that lowers costs and operational risks. As the network expands, its role as the default rail for African cross-border payments is solidified.
Emerging Market Payment Corridor Opportunities
PAPSS opens up previously underserved corridors, particularly between smaller African economies and major regional hubs. By reducing payment friction, it supports the AfCFTA’s objectives of driving intra-African trade and investment.
VASP Partnerships for Traditional Banks
Banks can partner with licensed VASPs to offer innovative payment solutions, digital wallets, and value-added services on the PAPSS infrastructure. Such partnerships require careful navigation of local licensing and compliance requirements, with banks often acting as gatekeepers for regulatory risk.
Compliance Firewall Benefits
PAPSS’s centralized compliance infrastructure acts as a “firewall,” screening transactions for AML/CFT risks and ensuring adherence to both local and international standards. This robust compliance framework enhances trust among regulators, banks, and end users, supporting broader adoption and integration.
In summary, PAPSS is catalyzing a new era of cross-border payment innovation in Africa, offering financial institutions opportunities to reduce costs, improve efficiency, and expand into new markets—while also presenting complex regulatory, compliance, and operational challenges that require strategic investment and collaboration. The system’s rapid adoption, robust technology, and alignment with continental trade objectives position it as a cornerstone of Africa’s financial integration, with significant implications for correspondent banking, wealth management, and institutional payment flows.
