Enhancing financial integration in Ghana through interoperable payment systems: a closer look at PAPSS and EPSS

Lucie Ekeleba Blay

Blay & Associates, Accra
Lucie.Blay@blayandassociates.com

In a landmark advancement for Ghana’s financial ecosystem, the country has recently joined the Pan-African Payment and Settlement System (PAPSS), further streamlining cross-border transactions across Africa. Ghana’s commitment to PAPSS marks a significant shift, building on the foundation laid by its use of the Ghana Interbank Payment and Settlement Systems (GhIPSS), since 2007. The integration of PAPSS adds a new dimension to Ghana’s payment infrastructure, opening new avenues for intra-African trade, while setting the stage for further regional financial unity under the proposed Economic Community of West African States (ECOWAS) Payments and Settlement System (EPSS).

The objectives and framework of PAPSS

Launched by the African Export–Import Bank (also known as Afreximbank), a multilateral financial institution established by African governments to support trade in Africa, and the African Union, in collaboration with Africa’s central banks, PAPSS serves as a centralised infrastructure for facilitating secure, cross-border payments across African countries. Previously, African nations relied on foreign correspondent banks to complete cross-border transactions, which increased the associated costs and caused delays. PAPSS resolves these issues by allowing payments to flow directly between African countries. The platform provides near-instant fund transfers between the originator in one country and the beneficiary in another, improving transaction efficiency, while minimising currency exchange costs.

PAPSS’s launch aligns with the African Continental Free Trade Agreement’s (AfCFTA) goals to boost trade across Africa by simplifying financial transactions.[1] Following its commercial launch in January 2022, in Accra, Ghana, PAPSS has since gained traction in the West African Monetary Zone (WAMZ), initially covering six member countries: Ghana, The Gambia, Guinea, Liberia, Nigeria and Sierra Leone. As of 2023, additional central banks from southern and eastern Africa have also joined PAPSS, namely Kenya, Zambia, Zimbabwe and Djibouti,[2] reflecting PAPSS’s vision to expand across the entire continent.

Membership and benefits for central banks and financial institutions

Central banks partnering with PAPSS[3] can expect multiple benefits, including reduced dependence on foreign exchange. By eliminating the need for intermediary foreign banks, PAPSS eases pressure on current accounts and minimises the demand for foreign exchange, making transactions more sustainable and cost effective. Improved financial transparency and oversight is another significant benefit. PAPSS provides central banks with increased visibility of cross-border transactions, which enhances regulatory oversight and potential revenue generation. Enhanced financial inclusion is also a crucial advantage. PAPSS’s infrastructure brings new financial opportunities to underserved regions, contributing to economic growth through improved intra-African trade.

In regard to financial institutions, as of June 2023, PAPSS’s network now includes notable banking groups, such as Ecobank, Access Bank, Zenith Bank, CalBank, Standard Bank and UBA Group, whose extensive regional networks reinforce the system’s connectivity and reach. PAPSS has also partnered with various switch systems, namely secure electronic systems that facilitate the routing and processing of financial transactions across different banks, financial institutions and payment networks, including Ghana Interbank Payment and Settlement Systems Limited (GhIPPS), a Ghanian switch system, ZimSwitch in Zimbabwe, GamSwitch in Gambia and NIBSS, Nigeria’s switch system, among others. In addition, in October 2023, the 15 countries that make up the Caribbean Community or CARICOM joined the PAPSS network to facilitate intra-regional trade transactions. This follows a 2022 memorandum of understanding between PAPSS and Buna, the cross-border and multi-currency payment system owned by the Arab Monetary Fund (AMF). These partnerships provide a foundation for seamless and affordable transactions across major economic centres throughout Africa, leveraging Africa’s financial diversity across a more unified market.

The vision of the ECOWAS Payments and Settlement System (EPSS)

Building on the vision of PAPSS, ECOWAS is advancing the development of the ECOWAS Payments and Settlement System (EPSS). Similar to PAPSS, the EPSS aims to unify payment systems across the 16 ECOWAS member countries. However, its objective is to contribute to the broader vision of a single central bank and a single currency (Eco is the name of the proposed currency). Furthermore, this regional payment system aims at enhancing intra-community trade in goods and services and constitutes an important step in the ECOWAS roadmap towards launching Eco (2022–2027). This integration is seen as an essential step towards harmonising the region’s diverse financial infrastructure and bringing it all under one efficient, interoperable framework.[4]

The road ahead for financial integration in Africa

The successful adoption of PAPSS and the upcoming EPSS initiative reflect Ghana’s, and Africa’s, commitment to establishing an integrated, resilient financial system that supports both regional trade and economic growth. These initiatives signal a transformative shift in African finance, where local currencies and efficient cross-border payment systems will become the norm rather than the exception. For Ghana, the journey from GhIPSS to PAPSS, and eventually the EPSS, is more than a series of technological upgrades, it is a path towards economic unity and financial independence that promises lasting benefits for businesses, banks and consumers alike.

In summary, PAPSS has set the stage for a new era of financial collaboration across Africa and Ghana’s proactive involvement underscores the country’s leadership in embracing this change. The forthcoming EPSS will likely add another layer of interconnectedness within west Africa, uniting the region under a shared vision for a cohesive, prosperous African economy.