PAPSS bets on local currencies to unlock Kenya’s Africa trade

NAIROBI, Kenya, Nov 12 – Kenyan businesses trading with other African markets could cut cross-border payment costs and reduce their reliance on foreign currencies as the Pan-African Payment and Settlement System (PAPSS) expands its network across the continent. The payment infrastructure, which enables businesses to send and receive money directly in participating African currencies, is seeking to address the high cost of settling transactions through conventional banking channels, where traders often depend on the US dollar as an intermediary currency. PAPSS Chief Executive Officer Mike Ogbalu says the system reduces the amount of foreign currency required to facilitate trade by allowing participating countries to offset payments flowing in opposite directions, with only the net difference settled in an acceptable settlement currency. This could ease pressure on businesses importing and exporting goods across African markets, particularly in countries such as Kenya, where access to foreign exchange and the cost of international transactions remain significant considerations for traders. “Instead of having to source 100 percent of the transactions in foreign currency, only the net difference is settled. We have significantly reduced dependence on third-party currencies in transactions between countries such as Kenya and Nigeria,” Ogbalu said. Under the arrangement, a Kenyan business selling goods to a buyer in Uganda, for instance, can receive payment in Kenyan shillings while the buyer makes the payment in Ugandan shillings. Ogbalu says transactions are processed in less than 120 seconds, compared with conventional arrangements that can take several days to confirm receipt of funds. The system also aims to reduce transaction charges, with PAPSS capping its average infrastructure fees at approximately 0.1 percent of transaction value, compared with costs of between 8 and 10 percent associated with conventional cross-border payments and remittances. However, the savings are not always fully reflected in the charges customers pay, as participating financial institutions can add their own margins. “One of the key design principles for us was how to lower the cost of transactions. Our average fees now total about 0.1 percent of the value. We are still dealing with participants who sometimes mark up our low costs, meaning the service does not reach customers as affordably as we intended.” Kenya is among the early adopters of PAPSS, with local financial institutions including KCB Group and Equity Bank connected to the network. However, the system says more work is required to translate infrastructure integration into widespread business usage, particularly among small and medium-sized enterprises that stand to benefit from cheaper regional trade. Ogbalu says PAPSS recorded more than 1,000 percent growth in adoption between last year and this year, although he did not disclose transaction volumes or the specific economic benefits already realized by Kenyan businesses. He said the organization was yet to comprehensively measure the impact of the platform on trade and businesses. PAPSS currently operates across 31 African countries and has integrated more than 220 commercial banks and 17 payment switches, including 12 national switches. The organization targets expanding its reach to 37 countries by the end of 2026 and at least 50 countries in 2027, when it plans to shift greater attention towards driving actual transaction volumes and business adoption. Beyond payments, the organization has introduced an Africa Currency Marketplace to match demand and supply for different African currencies, alongside a card scheme designed to facilitate payments within the continent without relying on settlement infrastructure outside Africa. The expansion comes as African governments seek to deepen intra-African trade under the African Continental Free Trade Area, with fragmented payment systems and currency convertibility remaining obstacles to achieving a more integrated regional market.