Boosting Intra-Africa Cross-Border Payments: A Path to Economic Integration

The AfricaNenda Foundation’s SIIPS 2024 Launch Programme in Accra, Ghana, brought together key stakeholders to discuss one of the most pressing issues facing the continent: Boosting Intra-Africa Cross-Border Payments. The panel, moderated by Sabine Mensah, Deputy CEO of AfricaNenda, featured insights from Dr. Kwasi Osei-Yeboah (Director Financial Stability, Bank of Ghana), Dr. Patrick Olomo (Head of Economic Policy and Sustainable Development, African Union Commission), Ruhling Herbst (Acting Executive Head: Africa Business Development & Strategy and Transformation Officer, BankServAfrica), and Thomas Lammer (Deputy Head of Secretariat-Committee on Payments and Market Infrastructures (CPMI), Bank for International Settlements). The discussion highlighted the challenges, opportunities, and strategies needed to enhance cross-border payments across Africa. 

The Importance of Cross-Border Payments in Africa 

Cross-border payments are a cornerstone of economic integration, particularly in a continent as diverse and dynamic as Africa. With the African Continental Free Trade Area (AfCFTA) aiming to create a single market of 1.4 billion people and a combined GDP of 3.4 trillion USD, seamless cross border payment solutions are essential. However, the current landscape is fragmented, with multiple currencies, regulatory frameworks, and legacy systems like SWIFT dominating the space. The panel emphasised that without efficient cross-border payment systems, the full potential of intra-African trade and economic growth will remain untapped. 

Key Challenges in Cross-Border Payments 

• Currency Risk and Settlement Issues: One of the most significant challenges is the dominance of hard currencies, such as the US dollar, as the settlement currency for cross-border transactions. This creates currency risk for businesses and increases transaction costs. As Dr. Kwasi Osei-Yeboah pointed out, achieving a level playing field requires strengthening domestic payment ecosystems and collaborating with regional partners to harmonize systems. 

• Regulatory Fragmentation: Dr. Patrick Olomo highlighted the need for regulatory harmonisation across African countries. The African Union is working on a Payment Service Directive for Africa (PSDA), which aims to create a harmonised regulatory framework to facilitate seamless cross-border payments. Countries have different regulations, particularly on customer due diligence (CDD) requirements, know your customer (KYC) and eKYC, and fintech licensing, just to name a few. These differences add to the degree of regulatory complexities faced by financial service providers and fintechs with cross border payments ambitions. To enable seamless cross border payment across Africa, there needs to be an alignment with the different regulations, some harmonisation and mutual recognition rule. The PSDA concept note proposes a development of a framework to harmonise payment service regulations across all countries in Africa to accelerate the development and scale of cross border payment solutions for customers and businesses. This regulatory harmonisation framework will allow existing initiatives like the Pan-African Payment and Settlement System (PAPSS), which is designed to enable transactions in local currencies, to scale. 

• Technical and Operational Complexity: Ruhling Herbst  from BankServAfrica shared insights from the Southern African region, where cross-border payment systems like TCIB have been launched. However, the complexity of multi-jurisdictional systems, coupled with the lack of sovereign support, has slowed progress. He emphasised the need for both multilateral and bilateral approaches to address these challenges. 
• Access and Inclusivity: Thomas Lammer from the Bank for International Settlements (BIS) stressed the importance of extending access to non-bank payment service providers. This would increase competition, enhance user experience, and reduce costs. He also highlighted the need for 24/7 operational systems to ensure real-time cross-border payments. 

Lessons from Global Best Practices 

The panel drew on global examples to provide insights into how Africa can improve its cross-border payment systems. Thomas Lammer referenced Project Nexus, an initiative by the BIS to interlink instant payment systems across multiples countries. He emphasised the importance of standardisation (e.g., ISO 20022) and governance frameworks to ensure seamless integration between different payment systems. 

Similarly, Ruhling Herbst shared lessons from South Africa’s PayShap instant payment system, which has seen rapid adoption since its launch. The success of PayShap demonstrates the importance of market-driven solutions and the need to balance commercial interests with end-user goals. 

The Role of Political Will and Regional Collaboration 

A recurring theme in the discussion was the need for political will to drive cross-border payment initiatives. Dr. Patrick Olomo emphasised that the African Union’s efforts, such as the PSDA and PAPSS, require strong political support to succeed. He also highlighted the importance of creating a single African payment market that can compete globally. 

Ruhling Herbst added that while multilateral arrangements are ideal, bilateral agreements can also play a crucial role in addressing specific challenges. The key is to focus on what works best for each region or country. 

The Way Forward: A Continental Village Approach 

The panel concluded that boosting intra-Africa cross-border payments is not a sprint but a marathon. It requires patience, commitment, and collaboration across all levels—governments, central banks, financial institutions, and the private sector. As Sabine Mensah appropriately put it, “It’s going to take a Continental Village to make this happen.” 

Key steps to move forward include: 

• Harmonising regulatory frameworks through initiatives like the PSDA. 

• Expanding access to non-bank payment service providers. 

• Investing in modern payment infrastructure that supports 24/7 operations. 

• Promoting the use of local currencies to reduce dependency on the US dollar. 

• Fostering regional and global partnerships to share best practices and resources. 

 

In conclusion, the SIIPS 2024 panel discussion underscored the critical role of cross-border payments in driving Africa’s economic integration and growth. While challenges remain, the continent is making significant strides through initiatives like PAPSS, PSDA, and regional payment systems. By leveraging global best practices, fostering political will, and embracing a collaborative approach, Africa can unlock the full potential of its cross-border payment systems and pave the way for a more integrated and prosperous future. 

 

By: Girum Fekadu Diriba, CDFP
DFS Risk Manager at Ethiopost
AfricaNenda Community of Practice (ANCoP) Ambassador  

 

Established in 2015, Digital Frontiers Institute is a proud brand of Digital Frontiers. Learn more about the Instant and Inclusive Payment Systems (IIPS) programme: https://iipscertification.org/