Payments - Introduction / Learning brief
PAPSS: the Pan-African Payment and Settlement System
Your notes
In simple terms / 01
What this means in plain language
PAPSS lets a company pay for intra-African trade in its own local currency while the beneficiary receives theirs, routing the instruction through the two central banks and netting the day's cross-currency balances among them — reducing reliance on a hard-currency intermediary.
Complete lesson / 02
Understand the full idea, step by step
Two companies in two different African countries agree a trade. In the usual pattern, the buyer first buys US dollars, sends the dollars across the world through a chain of correspondent banks, and the supplier converts them back into local currency at the far end — paying spreads and fees on both conversions, and waiting on a currency neither of them actually uses. What if the buyer could simply pay in its own currency, the supplier be paid in theirs, and the crossing happen entirely within Africa?
PAPSS at a glance
- Full name
- Pan-African Payment and Settlement System
- Launched
- 13 January 2022
- Founders
- The African Union and the African Export-Import Bank (Afreximbank)
- Purpose
- To support intra-African trade under the African Continental Free Trade Area (AfCFTA)
- Core idea
- Each party pays and is paid in its own local currency
- Settlement
- The day's cross-currency balances are netted among participating central banks and settled daily
What PAPSS actually is
The Pan-African Payment and Settlement System (PAPSS) is a shared switch that links the participating African central banks so that a payment can cross a border without leaving the continent's own systems. It was launched on 13 January 2022 by the African Union and the African Export-Import Bank (Afreximbank) to support intra-African trade under the African Continental Free Trade Area (AfCFTA). Its defining promise is currency-native: a company pays in its own local currency and the beneficiary receives theirs, with PAPSS sitting in the middle to make the two currencies meet. The hard-currency intermediary that a cross-border African payment has traditionally relied on is no longer required to route the value.
How the instruction travels
Follow the message, not the money — they take the same route but arrive at different times. Bank Alfa validates Asha Traders' instruction and forwards it up to its own central bank, Central Bank A, which is the participant that connects the country's banks into PAPSS. Central Bank A hands the cross-border instruction to PAPSS. PAPSS validates and screens it, then forwards it to the supplier's central bank, Central Bank B, which routes it down to Nordbank, the supplier's local bank. At each hop what crosses the border is information about who pays whom — the instruction — while the money itself is dealt with separately at settlement.
Deferred net settlement — many payments are cleared as they arrive but settled later as a single netted balance
PAPSS does not settle each payment individually the moment it is sent. Instead it clears instructions as they flow during the day, then at day's end adds up everything owed between each pair of participating central banks and reduces it to a single amount per currency — netting. Those netted balances are settled among the central banks daily. This is the deferred-net pattern: the clearing (who owes whom) happens continuously, but the settlement (the actual movement of value across the central banks' books) happens once, later, on a net basis — far fewer, larger movements than one settlement per payment.
You may be wondering: if Asha Traders never buys dollars, who actually bears the currency exchange between the two local currencies?
The exchange still happens — it just happens inside the arrangement rather than on Asha Traders' desk. Asha's local-currency payment and the supplier's local-currency receipt are two ends of the same instruction, and PAPSS carries the cross-currency position between the central banks until it is netted and settled. What changes is who touches a hard currency and when: instead of each company buying and selling US dollars on its own, the cross-currency balances are pooled and settled daily among the central banks. The buyer pays local currency A; the supplier receives local currency B; the reconciliation lives between the central banks, not on the traders' books.
One trade payment, step by step
- INSTRUCTION
Asha Traders instructs Bank Alfa to pay the supplier the local-currency equivalent of USD 20,000.00 — in Asha's own local currency, with no hard currency bought first.
- MESSAGE
Bank Alfa validates the instruction and forwards it up to Central Bank A, the participant that connects the country's banks into PAPSS.
- MESSAGE
Central Bank A submits the cross-border instruction to PAPSS, the shared switch linking the participating African central banks.
- VALIDATION
PAPSS checks the instruction is well-formed and routable and screens the parties against sanctions lists before it forwards anything; a potential match holds the payment for review.
- MESSAGE
Once validated, PAPSS forwards the instruction to Central Bank B, which routes it down to Nordbank — the message has crossed the border; the money has not yet moved.
- SETTLEMENT
Nordbank credits the supplier in the supplier's own local currency, matching the agreed value of the trade.
- CLEARING
At day's end PAPSS nets the day's cross-currency balances among the participating central banks into one amount owed each way per currency.
- SETTLEMENT
The netted balances settle among the central banks on a daily basis, clearing the day's cross-currency positions to zero between the central banks themselves.
Read the steps as text
- 01MessageAsha Traders instructs its local bank to pay the supplierAsha Traders (buyer) → Bank Alfa (buyer's local bank)
Asha Traders owes a supplier in another African country the equivalent of USD 20,000.00 for imported goods, and instructs Bank Alfa to pay in Asha's own local currency (local currency A) — no need to first buy a hard currency such as US dollars.
- 02MessageBank Alfa forwards the instruction to Central Bank ABank Alfa (buyer's local bank) → Central Bank A (buyer's central bank)
The buyer's local bank passes the validated instruction up to its own central bank, Central Bank A, which is the participant that connects the country's banks into PAPSS.
- 03MessageCentral Bank A sends the instruction to PAPSSCentral Bank A (buyer's central bank) → PAPSS (Pan-African Payment and Settlement System)
Central Bank A hands the cross-border instruction to PAPSS, the shared switch that links the participating African central banks so a payment can cross a border without leaving the continent's own systems.
- 04ProcessingPAPSS validates the instructionPAPSS (Pan-African Payment and Settlement System)
PAPSS checks the instruction is well-formed and routable and runs compliance screening on the parties before it forwards anything — a shared control point sitting between the two central banks.
Screening checkpoint: PAPSS instruction screening — Party names and details are screened against sanctions lists at the switch, in addition to the checks each bank and central bank runs; a potential match holds the payment for review before it is forwarded.
- 05MessagePAPSS forwards the instruction to Central Bank BPAPSS (Pan-African Payment and Settlement System) → Central Bank B (supplier's central bank)
Once validated, PAPSS forwards the instruction to the supplier's central bank, Central Bank B, which will route it down to the supplier's local bank — the message crosses the border, the money does not yet.
- 06MessageCentral Bank B routes the instruction to NordbankCentral Bank B (supplier's central bank) → Nordbank (supplier's local bank)
The supplier's central bank passes the instruction to the supplier's own local bank, Nordbank, which holds the supplier's account and will make the actual payment.
- 07PostingNordbank pays the supplier in the beneficiary's local currencyNordbank (supplier's local bank)
Nordbank credits the supplier in the supplier's own local currency (local currency B) — the amount matching the agreed value of the trade — so the supplier never has to touch the buyer's currency or a hard-currency intermediary.
- CR Supplier's account at Nordbank — local currency B (value of USD 20,000.00)
- 08Clearing obligationPAPSS nets the day's cross-currency balancesPAPSS (Pan-African Payment and Settlement System)
At the end of the day PAPSS adds up all the instructions between the participating central banks and nets them into a single amount owed each way per currency, so many payments become one balance per pair rather than a settlement per payment.
Netting produces who-owes-whom across the participating African currencies. The central banks do not have their money yet — that happens at settlement.
- 09SettlementThe netted balances settle among the central banksCentral Bank A (buyer's central bank) → Central Bank B (supplier's central bank)
PAPSS settles the netted balances among the participating central banks on a daily basis, typically before midnight, so the cross-currency positions built up during the day are cleared to zero each day among the central banks themselves.
- DR Central Bank A net position at PAPSS — net of local currency A (value of USD 20,000.00)
- CR Central Bank B net position at PAPSS — net of local currency B (value of USD 20,000.00)
COMMON CONFUSION
“Because the supplier is paid the same day the instruction arrives, PAPSS must settle each cross-border payment individually and immediately, like an RTGS system.”
The supplier being paid and the central banks settling are two different events. Nordbank can credit the supplier once the validated instruction reaches it, but the value between the central banks is not moved payment by payment. PAPSS clears instructions through the day, then nets each day's cross-currency balances among the participating central banks and settles the net amounts on a daily basis. Clearing happens continuously; settlement happens once, later, and net.
STRICTLY SPEAKING
Strictly speaking, the exact currencies in scope, the precise netting and settlement timing, the liquidity and funding arrangements among the central banks, and how screening responsibilities are shared across banks, central banks, and the switch are operational details that vary and can change. The durable lesson is the shape: pay in your own currency, be paid in theirs; route the instruction through the central banks and the shared switch; net the day's cross-currency balances among the participating central banks and settle them daily — reducing reliance on a hard-currency intermediary to move African trade across African borders.
FOR NOW, REMEMBER
- PAPSS is the Pan-African Payment and Settlement System, launched on 13 January 2022 by the African Union and Afreximbank to support intra-African trade under the AfCFTA.
- A company pays in its own local currency and the beneficiary receives theirs — no hard-currency intermediary is needed to route the value.
- The instruction routes local bank to central bank to PAPSS to the beneficiary's central bank to local bank; the message crosses the border before the money settles.
- PAPSS nets the day's cross-currency balances among the participating central banks and settles them daily — a deferred-net pattern that clears continuously but settles once, net.
TRY IT YOURSELF
Nordbank credits the supplier in the supplier's local currency the same afternoon the instruction arrives. A colleague concludes that PAPSS must therefore settle each cross-border payment individually the instant it is sent. Why is that wrong?
PAPSS is one way a payment crosses a border without a global hard-currency chain. Step back to the general shape of cross-border networks — how instructions route between countries and where the value actually settles.
KEEP GOINGKey takeaways / 03
Three things to remember
- 01
Identify who instructs, processes, clears, settles, and ultimately receives the funds.
- 02
Keep the exchange of payment information separate from the movement of money.
- 03
Trace where validation, accounting, charges, and exceptions enter the journey.
Operational sequence / 06
Follow the message and decision path
This compact sequence is a learning model. Exact routing and rulebook behavior can vary by scheme, participant, and implementation.
Read the steps as text
- 01MessageAsha Traders instructs its local bank to pay the supplierAsha Traders (buyer) → Bank Alfa (buyer's local bank)
Asha Traders owes a supplier in another African country the equivalent of USD 20,000.00 for imported goods, and instructs Bank Alfa to pay in Asha's own local currency (local currency A) — no need to first buy a hard currency such as US dollars.
- 02MessageBank Alfa forwards the instruction to Central Bank ABank Alfa (buyer's local bank) → Central Bank A (buyer's central bank)
The buyer's local bank passes the validated instruction up to its own central bank, Central Bank A, which is the participant that connects the country's banks into PAPSS.
- 03MessageCentral Bank A sends the instruction to PAPSSCentral Bank A (buyer's central bank) → PAPSS (Pan-African Payment and Settlement System)
Central Bank A hands the cross-border instruction to PAPSS, the shared switch that links the participating African central banks so a payment can cross a border without leaving the continent's own systems.
- 04ProcessingPAPSS validates the instructionPAPSS (Pan-African Payment and Settlement System)
PAPSS checks the instruction is well-formed and routable and runs compliance screening on the parties before it forwards anything — a shared control point sitting between the two central banks.
Screening checkpoint: PAPSS instruction screening — Party names and details are screened against sanctions lists at the switch, in addition to the checks each bank and central bank runs; a potential match holds the payment for review before it is forwarded.
- 05MessagePAPSS forwards the instruction to Central Bank BPAPSS (Pan-African Payment and Settlement System) → Central Bank B (supplier's central bank)
Once validated, PAPSS forwards the instruction to the supplier's central bank, Central Bank B, which will route it down to the supplier's local bank — the message crosses the border, the money does not yet.
- 06MessageCentral Bank B routes the instruction to NordbankCentral Bank B (supplier's central bank) → Nordbank (supplier's local bank)
The supplier's central bank passes the instruction to the supplier's own local bank, Nordbank, which holds the supplier's account and will make the actual payment.
- 07PostingNordbank pays the supplier in the beneficiary's local currencyNordbank (supplier's local bank)
Nordbank credits the supplier in the supplier's own local currency (local currency B) — the amount matching the agreed value of the trade — so the supplier never has to touch the buyer's currency or a hard-currency intermediary.
- CR Supplier's account at Nordbank — local currency B (value of USD 20,000.00)
- 08Clearing obligationPAPSS nets the day's cross-currency balancesPAPSS (Pan-African Payment and Settlement System)
At the end of the day PAPSS adds up all the instructions between the participating central banks and nets them into a single amount owed each way per currency, so many payments become one balance per pair rather than a settlement per payment.
Netting produces who-owes-whom across the participating African currencies. The central banks do not have their money yet — that happens at settlement.
- 09SettlementThe netted balances settle among the central banksCentral Bank A (buyer's central bank) → Central Bank B (supplier's central bank)
PAPSS settles the netted balances among the participating central banks on a daily basis, typically before midnight, so the cross-currency positions built up during the day are cleared to zero each day among the central banks themselves.
- DR Central Bank A net position at PAPSS — net of local currency A (value of USD 20,000.00)
- CR Central Bank B net position at PAPSS — net of local currency B (value of USD 20,000.00)
Evidence & review / 07
Evidence & review
PAPSS, cross-border within Africa (African Union and Afreximbank); the pay-in-your-own-currency, net-among-central-banks pattern generalises to other regional systems.
What this brief simplifies: The PAPSS validation and directory mechanics are compressed into one routing flow; specific currencies are shown as placeholders and daily netting is summarised.
Sources for this brief2
- Official requirement
PAPSS (Pan-African Payment and Settlement System) ↗ — Pan-African Payment and Settlement System (PAPSS) / Afreximbank · PAPSS: local-currency cross-border payments routed via central banks, daily multilateral netting; launched 13 January 2022 by the African Union and Afreximbank
PAPSS lets parties transact in their own African currencies; the days cross-currency balances are netted and settled among participating central banks daily.
- Simplified educational illustration
Payments Signal editorial teaching models — Payments Signal
Used wherever diagrams, scenarios, figures, or example values are didactic constructions rather than sourced facts; every such use carries a simplifications disclosure. All people, companies, banks, and list entries in examples are fictional.