Pan-African Payment and Settlement System (PAPSS) and Bank Performance

The Pan-African Payment and Settlement System (PAPSS) was adopted as a policy tool in 2022 to enable real-time, low-cost cross-border payments within African countries, settling in local currencies. Since its inception, numerous African banks have joined the network, allowing their customers to execute seamless cross-border transactions, while others are actively being encouraged to participate. This paper examines the impact of PAPSS participation on bank performance. Exploiting the staggered adoption of PAPSS across African banks within a difference-in-differences framework, we find that participating banks experienced a short-term decline in profits and an increase in cost-to-income ratios during the first two years. In the longer term, specifically from the third year, these costs began to decline, while profitability significantly improved. These findings imply that while PAPSS requires substantial short-term adjustment costs, it may ultimately enhance bank performance and efficiency over the longer horizon.