In a major step towards enhancing financial connectivity and promoting intra-African trade, KCB Group in Kenya and the Bank of Kigali in Rwanda have officially integrated the Pan-African Payment and Settlement System (PAPSS) into their operations. This integration marks a significant milestone in the digital transformation of Africa’s financial services sector, enabling faster, cheaper, and more secure cross-border transactions across the continent.

Developed through a strategic collaboration among the African Export-Import Bank (Afreximbank), the African Union Commission (AUC), and the African Continental Free Trade Area (AfCFTA) Secretariat, PAPSS is designed to eliminate the reliance on third-party currencies and correspondent banks. By using local currencies and streamlining settlement procedures, PAPSS is set to dramatically lower transaction costs, reduce processing times, and enhance the overall efficiency of cross-border payments in Africa.

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Transforming the Payment Landscape in Africa

Historically, cross-border transactions in Africa have been burdened by the need for intermediary currencies, typically the US dollar, and the involvement of multiple correspondent banks. These practices often result in increased costs, delays, and a lack of transparency for businesses and consumers alike. PAPSS addresses these challenges by establishing a unified platform that facilitates direct settlements in local currencies, bypassing the traditional hurdles that have long impeded intra-African trade.

The integration of PAPSS into the systems of KCB Group and the Bank of Kigali is expected to have far-reaching implications. For the first time, customers of these banks can send and receive payments across national borders seamlessly via their mobile applications and branch networks. This enhanced connectivity is not only a win for individual consumers but also a boon for small and medium-sized enterprises (SMEs) that are striving to tap into the vast market potential of Africa.

PAPSS CEO Mike Ogbalu III explained, “Our mission is to create an inclusive, efficient, and secure payment ecosystem that supports the continent’s economic integration. With PAPSS, businesses can trade more freely and competitively, as they no longer depend on correspondent banks outside Africa or the fluctuations associated with third-party currencies.”

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The Evolution of PAPSS: From Pilot to Pan-African Rollout

PAPSS was initially piloted in 2022 within the West African Monetary Zone (WAMZ). What began as a test of innovative financial market infrastructure has quickly evolved into a robust system now integrated with 15 central banks, over 150 commercial banks, and 14 switches. These switches—technological systems that process transactions between financial institutions—ensure that the platform remains responsive and reliable as it scales up to meet increasing demand.

The system’s successful expansion beyond its initial pilot phase highlights the growing appetite for modernized payment solutions across Africa. With only 16% of Africa’s total trade currently taking place intra-regionally, the launch of PAPSS in countries like Kenya and Rwanda represents a significant step towards unlocking the continent’s untapped economic potential. By reducing friction in cross-border payments, PAPSS is poised to stimulate trade, foster economic growth, and enhance financial empowerment across diverse sectors.

KCB Group CEO Paul Russo remarked, “Our entry into PAPSS is a strategic move that aligns perfectly with our vision to support economic growth in Kenya and across Africa. Leveraging our digital capabilities and regional footprint, we are committed to facilitating seamless financial transactions that will drive both local and continental commerce.”

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Strategic Benefits for Banks and Businesses

Enhanced Transaction Speed and Cost Efficiency

One of the most immediate benefits of PAPSS is the marked improvement in transaction speed. Traditional cross-border transfers can take several days to process due to the involvement of multiple intermediaries and currency conversion steps. With PAPSS, transactions are settled in near real-time, enabling businesses to manage cash flow more effectively and reduce operational delays.

Cost efficiency is another major advantage. By eliminating the need for third-party currencies and reducing the layers of intermediaries, PAPSS significantly lowers transaction fees. For businesses that engage in frequent cross-border trade, these savings can be substantial, thereby increasing overall profitability and competitive edge.

Strengthening Financial Inclusion and Digital Banking

The integration of PAPSS into the mobile apps and branch networks of KCB Group and the Bank of Kigali underscores the transformative power of digital banking in Africa. As more Africans gain access to mobile financial services, the region is witnessing a surge in digital transactions that bypass traditional banking limitations. This shift is crucial for fostering financial inclusion, particularly in rural and underserved areas where access to conventional banking services may be limited.

For many entrepreneurs and small business owners, the ability to send and receive payments quickly and securely is essential for expanding their operations and tapping into new markets. PAPSS is therefore not just a technological upgrade; it is a critical enabler of broader economic participation across the continent.

Dr. Diane Karusisi, CEO of the Bank of Kigali, highlighted the system’s potential impact, noting, “For example, when someone sends Rwandan francs from Rwanda, PAPSS can ensure that the recipient in Ghana receives the money in their local currency. This kind of seamless currency conversion and direct settlement is a game changer for regional trade and for the everyday financial transactions of our people.”

Facilitating Trade under the AfCFTA Agenda

The African Continental Free Trade Area (AfCFTA) represents one of the most ambitious economic integration efforts in Africa, aimed at creating a single market for goods and services across the continent. PAPSS plays a pivotal role in realizing the AfCFTA vision by providing the essential infrastructure needed to support cross-border trade. With reduced transaction costs and increased payment security, businesses are more likely to explore new trade opportunities and expand their operations beyond national borders.

The integration of PAPSS is expected to bolster intra-African trade by addressing one of its most significant barriers—the inefficiency of cross-border payments. With improved financial connectivity, the continent can begin to realize the full potential of its diverse markets and natural resources. This is particularly important given that intra-African trade currently accounts for only a fraction of Africa’s total trade volume. Enhanced payment systems like PAPSS can help shift this balance, promoting a more integrated and resilient African economy.

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The Role of Regulatory and Collaborative Frameworks

Strengthening Pan-African Financial Infrastructure

The successful rollout of PAPSS is a testament to the power of pan-African cooperation. By bringing together key institutions such as Afreximbank, the AUC, and the AfCFTA Secretariat, the system embodies a collaborative approach to solving continent-wide challenges. This synergy between various stakeholders not only strengthens the financial infrastructure but also sets a precedent for future collaborative initiatives.

The collaboration among member states and financial institutions helps ensure that the system is built on robust regulatory frameworks and adheres to international best practices. This, in turn, boosts investor confidence and paves the way for further innovation in Africa’s financial sector.

Easing Cross-Border Regulatory Barriers

In Rwanda, the integration of PAPSS has coincided with additional regulatory initiatives designed to streamline cross-border payments. The National Bank of Rwanda recently signed a memorandum of understanding (MoU) with the Bank of Ghana to create a license passporting framework. This framework is set to simplify the operations of regulated fintech companies by allowing them to extend their services across borders with minimal regulatory friction.

License passporting is particularly significant in the fintech space, where rapid innovation often outpaces regulatory adaptation. By establishing a framework that enables fintech companies licensed in either Ghana or Rwanda to operate seamlessly in both countries, regulators are fostering an environment that encourages innovation while maintaining consumer protection and financial stability.

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Broader Implications for African Economic Integration

Driving Digital Transformation in Africa

The integration of PAPSS by major banks such as KCB Group and the Bank of Kigali is emblematic of a larger digital transformation sweeping across Africa. As mobile technology and digital financial services become increasingly ubiquitous, the traditional barriers to economic participation are being dismantled. This transformation is critical for unlocking new economic opportunities, particularly for youth and small business owners who have historically been excluded from the formal financial system.

The ongoing digital revolution is also reshaping the way African economies operate, with technology playing a central role in everything from agriculture to healthcare. In this context, PAPSS is more than just a payment system—it is a cornerstone of a broader strategy to modernize Africa’s financial ecosystem and enhance its global competitiveness.

Enhancing Trust and Security in Digital Transactions

Security and trust remain paramount in any financial transaction system. PAPSS has been designed with state-of-the-art security protocols that ensure the integrity of every transaction. By leveraging advanced encryption technologies and robust verification processes, the system minimizes the risk of fraud and cyberattacks. This is particularly important in an era where digital transactions are becoming the norm, and where any security breach could have far-reaching consequences for consumer confidence.

For banks and businesses, the enhanced security provided by PAPSS not only protects financial assets but also builds trust among users. As more people become comfortable with digital banking, the overall uptake of such technologies is likely to increase, driving further financial inclusion and economic growth.

Stimulating Intra-African Trade and Investment

By significantly reducing the barriers to cross-border payments, PAPSS is poised to stimulate intra-African trade and attract investment from both domestic and international players. Easier payment processes can help reduce the overall cost of doing business, making it more attractive for companies to expand their operations across the continent. This, in turn, can lead to job creation, technology transfer, and a more integrated African market.

Investment in digital payment infrastructure is viewed by many economists as a critical driver of economic growth. As businesses and governments recognize the benefits of seamless financial transactions, there is likely to be increased investment in related sectors such as cybersecurity, fintech innovation, and mobile communications. These investments will further enhance the overall digital ecosystem, creating a virtuous cycle of growth and development.

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Looking Ahead: Opportunities and Challenges

Opportunities for Further Expansion

The integration of PAPSS by KCB Group and the Bank of Kigali is just the beginning. As the system continues to expand its network of participating banks and financial institutions, more African countries are expected to come on board. This gradual expansion will reinforce the pan-African payment network and help realize the full potential of the AfCFTA. For countries that have yet to integrate, the success of PAPSS in Kenya and Rwanda serves as a compelling case study and a model for future digital payment initiatives.

Moreover, the potential to integrate additional services—such as real-time currency conversion, automated compliance checks, and data analytics—could further enhance the utility of PAPSS. By providing a comprehensive suite of digital financial services, the platform could transform the way business is conducted across Africa.

Potential Challenges and Mitigation Strategies

Despite its many benefits, the rollout of PAPSS is not without challenges. One of the key hurdles is ensuring that all participating institutions maintain a high level of interoperability and security. Given the diverse regulatory environments across African countries, achieving uniform standards can be complex. Continuous collaboration between central banks, regulatory bodies, and financial institutions is essential to address these challenges.

Another potential issue is the digital divide that still exists in many parts of Africa. While urban centers are rapidly embracing digital financial services, rural areas may lag due to limited internet connectivity and technological infrastructure. To fully realize the benefits of PAPSS, concerted efforts must be made to extend digital infrastructure to underserved regions, ensuring that all citizens can participate in the digital economy.

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Conclusion: A New Era for Pan-African Financial Connectivity

The integration of the Pan-African Payment and Settlement System by KCB Group in Kenya and the Bank of Kigali in Rwanda represents a transformative leap forward for the continent’s financial services sector. By eliminating the need for third-party currencies and correspondent banks, PAPSS is setting the stage for faster, more secure, and cost-effective cross-border transactions. This innovation not only facilitates greater trade and investment within Africa but also contributes significantly to the broader goal of regional economic integration under the AfCFTA framework.

As Africa continues its digital transformation journey, systems like PAPSS will play an increasingly critical role in shaping the future of commerce on the continent. The collaboration among leading financial institutions, regulatory bodies, and continental organizations underscores the commitment to building a resilient, inclusive, and modern financial ecosystem. With enhanced digital connectivity, robust security measures, and a focus on financial inclusion, the stage is set for Africa to unlock new levels of economic potential.

The coming years will undoubtedly see further expansion of PAPSS as more banks and countries integrate into this pioneering network. While challenges remain, the opportunities for driving economic growth and fostering regional cooperation are immense. For businesses, consumers, and policymakers alike, the successful implementation of PAPSS is a clear indicator that Africa is poised to become a major player in the global digital economy.

In this new era of pan-African financial connectivity, the integration of PAPSS is more than a technological upgrade—it is a strategic imperative that will drive sustainable development, boost intra-African trade, and empower communities across the continent. As stakeholders work together to navigate the challenges and seize the opportunities ahead, the future of Africa’s financial landscape looks brighter than ever.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

11th March, 2025