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Kenyan banks expand traders, investors global payment options
Instead of the corresponding banks under the SWIFT Banking system, cross-border payments under Papss will be settled by the African Export-Import (Afrexim) Bank, which will ensure transparency of the transaction and instant payment.
Top banks in Kenya have adopted additional international payment systems, hoping to tap the rising inflow of cross-border trade and investment.
In the latest development, Stanbic Bank Kenya’s parent company Standard Bank revealed that it would join China's global interbank payment system (CIPS) by the end of 2025—joining other top banks such as KCB Group and Equity which recently expanded their international payment options for traders and investors amid rising global transactions.
“At the moment we are using SWIFT but Standard Bank is in the process of joining CIPS which is the equivalent but for Chinese Yuan-based transactions,” Stanbic Bank Kenya’s Senior Vice President and Head of the China Desk, Muya Guo, told the Business Daily.
The CIPS facilitates the clearing and settlement of cross-border transactions in the Chinese yuan. The system, launched in 2015 and backed by the People’s Bank of China, allows global banks to clear cross-border yuan transactions directly onshore within the country’s domestic financial system, instead of through clearing banks in offshore yuan hubs.
Stanbic said CIPS will help boost its chances of capturing opportunities from the growing trade and investment ties between China and Africa.
Besides its upcoming entry into CIPS, Stanbic Bank recently joined a new Pan-African cross-border payment alongside Equity and KCB as the lenders angled for a Sh3.4 trillion (Sh441 trillion) market under the new African Continental Free Trade Area.
The three are among the first local lenders to sign up for the Pan-African Payment and Settlement System (Papss), touted as a panacea for increased regional trade on the continent by enabling cross-border transactions by eliminating the Western correspondent banks associated with SWIFT.
Papss enables speedy transfers of funds between originators in one African country and beneficiaries in another. It also enables users to cut costs and encumbrance of complex foreign exchange requirements for cross-border transactions.
The widened options for international payment signal a growing push for Africa to diversify from the Belgian-based SWIFT banking system for cross-border traders amid political concerns around the US-controlled international settlement system.
SWIFT—an acronym for the Society for Worldwide Interbank Financial Telecommunication— is a global messaging platform that has long enabled banks to send trillions in payments across borders every day.
While the SWIFT system has evolved into a reliable settlement system underpinning most of the global trade, it has many actors.
The system, characterised by its corresponding banks, largely based in North America and Europe, has been bureaucratic to African traders who would like to trade with each other.
With SWIFT, payment across two African countries can take between two and three days as they have to pass through intermediaries or corresponding banks for both the sending and receiving banks.
“If I am sending money in Nigeria, it is actually faster for me to get on to a plane, land in Nigeria with cash, and give you the cash than it is to initiate a transaction from my bank account to your bank account in Nigeria,” Edward Nakitare, the head of International Money Transfers at KCB said.
Instead of the corresponding banks under the SWIFT Banking system, cross-border payments under Papss will be settled by the African Export-Import (Afrexim) Bank, which will ensure transparency of the transaction and instant payment.
“Now, for the first time on the continent you can actually send funds in your own currency, meaning if you have a naira account and I have a Kenyan shilling account, I can actually send you Kenyan shillings for you to receive naira,” Mr Nakitare added.
An efficient payment system could spur trade in Africa which lags other regions, accounting for only about 13-15 percent of its total merchandise trade, compared to 60-68 percent for Europe, and 59 to 64 percent for Asia.
Intra-regional trade for Latin America and the Caribbean is between 31 and 40 percent.
But there are plans to deepen intra-African trade through the AfCFTA, the largest free trade area which already has a membership of 55 countries.
In 2024, intra-African trade saw a positive trend, with its share rising to 12 percent of the continent's total trade, despite a contraction in African imports, driven by efforts like the AfCFTA implementation, said the Afrexim Bank in a report.
