AfCFTA: How prepared are our payments services and systems?


For the banking system to adequately play its expected role under the African Continental Free Trade Area (AfCFTA), it would need to drive value creation by developing new technologies, scaling its payment infrastructure and methods to a pan African level to serve the diversified economies on the continent.

The system, which has been a steady anchor of the financial sector, became the cornerstone of the success story so far in handling the socio-economic effects of the coronavirus pandemic, proving that the banking industry is ready to take on the liberalization process under the AfCFTA, through the facilitation of transactions, mobilizing savings, allocating capital funds and monitoring managers so that the funds allocated will be utilised as envisaged, as well as managing risks.

Although cash remains the most commonly used payments system, digital and electronic payments are being used more and more across the continent. Cross-border payments are almost exclusively digital.

Payments cover a range of financial products and services – at the retail end, from point-of-sale systems, to online payments gateways, remittance services, mobile money transactions, bill payments, wire transfers, credit and debit cards, and electronic funds transfers. On the commercial side, business to business transactions, inter-bank payments and treasury services all cross borders. Payments services encompass all the services needed to transact a payment – including processing, clearing and settlement.

Already, Ghana and Nigeria have made steady progress with the integration of payment systems, as part of the implementation of an integrated payment system of West African States. The technical level of integration has been completed, and currently what remains is the stage to synchronize the settlement of currencies exchanges during transactions.

Data from the Ghana Interbank Payment and Settlement Systems Limited (GhIPSS) shows that a total of GH¢254 billion was transacted through its system during 2020, representing a 16 percent increase compared to the GH¢219 billion in 2019. Despite the economic fallout from COVID-19 pandemic, there has been an accelerated adoption of digital payments as witnessed in the surge in e-payments volumes. At the end of 2020, a total of 77 million transactions were processed across all platforms, compared to the 38 million transactions processed in 2019, representing a 103 percent increase.

This signifies a major leap in the adoption of digital payment systems across the different platform being operated in the country.

In 2020, the real-time portfolio comprising GhIPSS Instant Pay, Mobile Money Interoperability (MMI), Proxy Pay, GhQR, among others, recorded significant growth, closing the year with the strongest performance. The major contributor to this performance was MMI; processing a total of 43.9 million transactions, representing a 367 percent increase from nine million transactions processed in 2019.

Despite the state of the economy in 2020, the clearing house recorded a nine percent increase in transaction value from GH¢209 billion in 2019 to GH¢229 billion.

e-zwich transactions declined by three percent from 10.7 million transactions in 2019 to 10.4 million in 2020. gh-link transactions also declined by 17 percent from 900,000 transactions in 2019 to 800,000 transactions in 2020. Despite the decline in transaction volumes, the value of transactions increased. The value of e-zwich transactions increased by 43 percent from GH¢6 billion in 2019 to GH¢9 billion in 2020.

Following the positive gains made in the payment space, and the growing uncertainty about the future of the world, post the COVID-19 pandemic, the World Payment Report 2020 predicts that non-cash transactions would grow by US$ 1.1 trillion by 2023.

Part of GhIPSS’s­ strategic objective for 2020 was to drive adoption and usage of its real-time payments services and expand the portfolio for same. In view of this, the Proxy Pay and GhQR services were launched and rolled out in March last year.

Ghana is currently seeing a growing adoption of non-cash payments among individuals. In order to consolidate the gains made in 2020, GhIPSS intends to continue to pursue the cashlite Ghana Agenda by deepening usage of existing digital payments platforms while exploring other opportunities.

GhIPSS intends to partner with institutions to extend the use of the ACH NRT, Proxy Pay, GIP Payment Gateway and the GhIPSS Corporate Suite to corporate institutions. These services will provide corporate institutions with efficient payment options.

Late last year, the Afreximbank, in collaboration with the African Union and some African central banks launched a Pan – African Payment and Settlement System (PAPSS), which is a central financial market infrastructure to support payment arrangements to expand the international trade of African States, and to facilitate economic and financial integration of Africa.

PAPSS will connect the entire continent and handle instant payments in multiple African currencies and provide a settlement mechanism that creates trust within the ecosystem. This brings two critical changes to Africa’s trade finance: minimizing the use of hard currencies in trade payments, and domesticating payments and settlements within Africa. This, in turn, will help organizations and their financiers manage currency risks better.

According to the National Payment Systems Strategic Plan (2019-2024), the final integration of West African states payment systems will be implemented by the end 2022. GhIPSS is expected to introduce a scheme to link the National Switching and Processing System – gh-LinkTM with other West African countries.

Africa’s financial services sector will also be relied on to provide the credit and support necessary for certain industries to move forward particularly the infrastructure and manufacturing sectors, which will be at the centre of Africa’s development goals.

The AfCFTA would expand market access for Ghana’s exporters of goods and services, spur growth and boost job creation, eliminate barriers against Ghana’s products, provide a Dispute Settlement Mechanism for stopping the hostile and discriminatory treatment directed against Ghanaian enterprises, safeguard the Ghanaian economy from dumping and unfair trade practices and support the industrial policy, among others.

AfCFTA can contribute to the development of sound, effective and efficient payments systems and payments services in several ways. Services will be better able to proliferate across the continent if barriers to cross-border operation are reduced via the AfCFTA, while greater integration can be achieved via the regulatory commitments in the AfCFTA. At the same time, increased trade because of the AfCFTA will create greater demand for payments services, and thus could provide the impetus for improving existing infrastructure.

Commitments made under the African Continental Free Trade Area agreement (AfCFTA) will also shape national policy. This is particularly the case for services, where countries often lack coherent policy. The commitments made at the continental level can set the direction of national policy or provide the political impetus for changes.

Barriers to the expansion of payments services and cross-border payments

Payment providers can have difficulty providing services cross-border for several reasons. There can be trade barriers that manifest in domestic regulation, such as discriminatory treatment of foreign providers, the requirement for local incorporation, prohibitions on cross-border services or limitations on the movement of capital. There are also infrastructure barriers – the actual transmission of money from one country to another may be difficult either because of the cross-border connection or the payments system in either country.

The most troublesome barriers to the greater integration of payments systems and the expanded provision of payments services are the regulatory barriers including licensing and capital requirements.

Except for cash payments, all cross-border payments require electronic messaging and thus, the cross-border flow of data is essential to the functioning of cross-border payments. Payment systems and services rely upon telecommunications, so to the extent the AfCFTA can create conditions for improved telecommunications infrastructure, this will also support the development of payments systems and services.

Along with guaranteed access for payments services providers, countries should commit to guaranteed access to payments infrastructure – including national payments services, clearing and settlement systems, ATM networks and credit or debit card schemes, in a non-discriminatory way.

This is particularly important where, as often is the case, the system proprietary to one or a group of providers. This would allow a payments provider from one country to provide payments services seamlessly in another African country. This goes beyond market access commitments and may require countries to make commitments on self-regulatory organisations or licensing requirements.

There are already various regional payments systems in place in the RECS – including the East Africa Payment System (EAPS) and the SADC Regional Integrated Settlement System. These systems are designed to make cross-border payments easier, and less reliant on correspondent banking arrangements which can be slow and costly.


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