Streamlining African payment systems has the potential to bring more people into the formal financial system and facilitate seamless cross-border payments and transfers, and reduce the cost, according to Abderrahim Bouazza, an executive at Morocco’s central bank, Bank Al-Maghrib (BAM).
Adopting more efficient cross-border payment would reduce payment delays and costs while increasing the security of transferring remittances, Bouazza said at a panel discussion on September 11 organized by Morocco’s Permanent Mission to the UN in Geneva as part of the World Trade Organization’s (WTO) Public Forum.
Beyond remittances, cross-border payments have the potential to boost inter-continental trade in Africa. Central banks across the continent are already working to integrate their payment systems into the Pan-African Payment and Settlement System (PAPSS).
PAPSS is dedicated to supporting trade within the African Free Trade Area (AFTA), and would enable instant exchanges in local currencies and operates 24/7.
To support trade within the AFTA, African central banks, including BAM, are collaborating to integrate their payment systems into the PAPSS. This system will enable instant exchanges in local currencies and operates 24/7.
Morocco has been leading the effort in upgrading its payment systems. In 2023, BAM implemented an instant payment system in 2023 and is now upgrading its real-time settlement system to ensure compatibility with regional platforms.
Despite their overall improvement, transfer of remittances in Africa continue to face challenges requiring greater mobilization of stakeholders, including UN institutions, governments, and central banks, Bouazza noted.
To maximize the impact of remittances on African development, it is essential to optimize financial flows, he added.
“Surveys have shown that migrants are inclined to increase their remittances when economic conditions in their country of origin are favorable,” Bouazza argued.
International organizations have long called for lowering the cost of remittances. Last week, the International Organization for Migration (IOM) said that lowering remittance costs to under 3% could increase family incomes in developing economies by USD 2.6 billion annually.
As of 2024, the average cost of transferring money to developing countries is significantly high, especially in Africa, where it stands at 7.9%.