Expert Explains How Blockchain for Payments Will Boost AfCFTA

Nosa Alekhuogie
The Chief Technical Officer (CTO) of Digital Encode Limited, Dr. Oluseyi Akindeinde, has said the adoption of Blockchain for payments will fast-track the trade agreement objectives of the African Continental Free Trade Area (AfCFTA).

Highlighting the advantages of the Blockchain for payment at the Africa Tech Alliance Forum (AfriTECH2021), which held in Lagos recently, Akindeinde said it would reduce the risk of corruption and transaction costs.

The CTO of Digital Encode, an information security management and compliance advisory company, cited an example of Pan African Payment and Settlement System (PAPSS), designed to facilitate the expected increased volumes in cross-border payments across the continent.

He explained that blockchain would enable peer-to-peer payments without an intermediary (either a bank or a clearinghouse).
Akindeinde noted that the technology would also lead to increase in instant payments, saying, “With it, participants will no longer need to convert local currencies into hard currencies which then entailed the funds leaving Africa to be converted before being sent back again to the beneficiary bank – adding days to the transaction time.
“In addition, compliance, legal, and sanctions checks are performed instantly within the system. Near-instant payments process within 120 seconds.”

Speaking about the current mode of payment system for financing cross border trade, he said Africa’s central banks would work in collaboration with the PAPSS to provide a payment and settlement service to which commercial banks, payment service providers and fintechs across the region could connect as participants.

He further explained that trade finance; that is the financial institutions that provide credit facilities in order to guarantee exchange of goods across borders, had remained for too long without making much impact with the growth of global trade flows.

According to him, in 2015 alone, the trade finance market was measured at more than $10 trillion, but only about 1.7 per cent of this takes place across Africa. Trade settlements are usually done in foreign currencies typically in foreign banks

“At a time when cross-border trading is high on the agenda with the African Continental Free Trade Area agreement now a reality, PAPSS is expected to facilitate the expected increased volumes in cross-border payments

“With Instant payment, participants no longer need to convert local currencies into hard currencies which then entailed the funds leaving Africa to be converted before being sent back again to the beneficiary bank – adding days to the transaction time. In addition, compliance, legal, and sanctions checks are performed instantly within the system. Near-instant payments process within 120 seconds,” Akindeinde said.