How PAPSS Instant Payment Works.
a) A buyer/payer in one country, for example, Ghana initiates a PAPSS Instant Payment (Credit transfer) in local currency (Cedi) using mobile/ internet banking channel of his bank. The buyer’s bank in Ghana deducts the cost of the transaction from the buyer’s account and then transmit the amount (using an ISO20022 message) to the PAPSS.
b) On receipt of the message, PAPSS will validate the account balance of the originating bank, for sufficient fund to proceed with routing of the message to the beneficiary. If there is an insufficient fund, PAPSS will send a rejection notification to the originating bank.
c) If the funds availability validation is successful, the transaction is routed to a beneficiary bank in another country, for example, Nigeria’s beneficiary bank which will in turn credit the seller’s account in local currency (Naira). A successful payment notification is then sent to the originating bank in real-time, which is further sent to the buyer/ payer.
d) At the end of day, settlement notification is sent to both central banks ,Ghana and Nigeria, showing their net settlement positions in settlement currency.
e) Assuming Ghana has a net debit position of GHS450 (we assume GHS4.5/USD1.0) while Nigeria has a credit position of NGN36,000 (we assume NGN360/USD1.0), Ghana will authorize (remit) a debit of the equivalent of GHS450 (USD100) from its settlement account with Settlement Bank (Afreximbank).
f) Also, the Settlement Bank (Afreximbank) will credit the equivalent of NGN36,000 (USD100) which is the net credit due to Nigeria into Nigeria’s settlement account with Settlement Bank (Afreximbank).
This saves liquidity costs for central banks as well as bank and non-bank participants in the Payment System.