Kenya's Integrated Payment Service Ltd (IPSL) and the Pan-African Payment and Settlement System (PAPSS) have launched a significant payment corridor, connecting the Pesalink network with the continent-wide system. This strategic collaboration, backed by Afreximbank, is set to transform cross-border transactions by enabling instant and secure payments in local currencies. The initiative marks a pivotal step towards simplifying intra-African trade and fostering deeper economic integration across the continent.
Overcoming Historical Payment Hurdles
For years, cross-border commerce in Africa has been hampered by inefficient and costly payment systems. According to the World Bank, transaction costs average between 7-8% of the total value, exceeding the global average. Furthermore, settlement processes can take several days, creating significant liquidity challenges for individuals and businesses alike.
The new Pesalink-PAPSS corridor directly addresses these challenges by eliminating the reliance on foreign intermediary currencies like the US dollar. This system facilitates direct, local-currency settlements, which significantly reduces conversion costs and bypasses complex correspondent banking relationships. The result is a more streamlined and affordable payment process for all participants involved in cross-border trade.
A Strategic Alliance for Integration
Through this partnership, Pesalink now functions as a Technical Connectivity Provider for the PAPSS platform. This integration effectively connects over 80 Kenyan banks, fintechs, and mobile money operators within the PesaLink network to more than 160 commercial banks across Africa. The expanded reach provides Kenyan businesses and individuals with unprecedented access to a unified continental payment infrastructure.
Mike Ogbalu III, CEO of PAPSS, highlighted that such collaborations with national payment switches are essential for the system's success. He noted that PesaLink is the first switch piloted for transaction termination in Kenya, a move already driving greater adoption. This model opens more channels for seamless, local-currency payments, accelerating the vision of a financially integrated Africa.
Fostering Economic Growth and Trade
This initiative is a cornerstone in achieving the objectives of the African Continental Free Trade Area (AfCFTA). Afreximbank President Prof. Benedict Oramah emphasized that creating an efficient and inclusive payment ecosystem is vital for realizing a single African market. The new corridor empowers businesses by providing a reliable and affordable means to conduct transactions across borders.
Gituku Kirika, CEO of IPSL, remarked that the collaboration marks a pivotal moment for Kenya’s financial landscape. He stated that Kenyan financial institutions can now offer their customers faster and cheaper cross-border payment solutions. This capability will help clients cultivate more regional trading relationships and thrive in an increasingly integrated digital economy.
The economic benefits are expected to extend beyond large corporations to small and medium-sized enterprises (SMEs), which are crucial to Africa's economy. By lowering barriers to entry for cross-border commerce, the partnership is poised to boost trade volumes and support sectors like tourism. This ultimately fosters greater economic resilience and self-reliance for nations across the continent.
The launch of the PesaLink-PAPSS payment corridor represents more than a technological advancement; it is a strategic move toward African economic sovereignty. By facilitating seamless intra-continental trade in local currencies, the partnership lays critical groundwork for a more prosperous and interconnected future. This development is a clear signal of Africa's commitment to building a unified financial infrastructure that drives sustainable growth.