Cross-border Payments and update on the SA Situation
The Pan-African Payments and Settlements Service (PAPSS) and EFA organised a session at the UNCTAD eWeek. We pointed out that cross-border ecommerce requires payment mechanisms to ensure that purchases are processed effectively, fast and at a reasonable cost. These digital payment services must include mobile money in addition to bank transfers, and must be able to process micro-payments (eg, to assist cross-border informal traders). In 2022 two payment mechanisms were launched in Africa – PAPSS and TCIB. However, there remains the need to solve currency volatility in intra-African trade. Ecommerce companies find that national currency fluctuations discourage trade within the continent. This has resulted in reliance on global currencies for much intra-Africa trade. These are a costly and slow solution for cross-border ecommerce. Some African Regions are now discussing the possibility of launching regional single currencies, or currencies based on Central Bank Digital Currencies systems.
The session looked at the cross-border payment mechanisms, and also possible solutions to reduce currency volatility. One option is a common currency (the Central African Franc is a common currency for 6 countries), and now the East African Community is looking to create a common currency for it 7 members; or a Central Bank Digital Currency (CBDC). A CBDC or a stable coin (not necessarily the same structure) can be used as a trading currency rather than a traditional coinage solution. There are advantages and disadvantages to the different solutions. This is a debate that will continue to seize interest as both shortages of the US$ and political efforts to “de-dollarize” Africa continue.
Meanwhile in SA, the Payments Association (PASA) has confirmed that the structure for the planned Payments Industry Body (PIB) has been approved by the Reserve Bank (SARB). However, it is necessary to move the licensing tasks out of PASA, which will only be done once the COFI Bill is adopted. That does not seem likely before the elections.
SARB was to hold a meeting on “instant EFTs” in December, however this has been postponed until the New Year. There have been rumblings from SARB that 2024 may see some new activities to clip the wings of the legacy banks. Apparently, SARB was less than impressed that both the mobile money service (ShapShop) and QR Code solution have been delayed by the big banks until sometime next year (see last month’s Newsletter).
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