EAC closer to harmonised cross-border payments

Mombasa, Kenya | THE INDEPENDENT | The East African Community has moved closer towards a easing cross-border payments, with the regional validation of the Draft EAC Cross-Border Payment System Master Plan.

During the EAC Regional Payment Systems Steering Committee meeting held in Mombasa, Kenya, Michael Eganza, the committee chairperson, said that this moves the region closer to a more integrated and efficient payments landscape.

“By implementing the Master Plan and the proposed initiatives, we are laying the groundwork for a seamless, cost-effective and inclusive financial ecosystem,” he added.

The successful implementation of the Master Plan is expected to enhance trade, investment, and economic collaboration across the region.

It envisions a future where East Africans can conduct cross-border transactions with ease, fostering deeper economic integration and financial inclusion.

Its mission is to implement a secure, efficient, and interoperable payments framework that aligns with the objectives of the EAC Monetary Union.

The strategic framework of the Master Plan is built upon four key pillars that include Governance, Legal, Regulatory, and Oversight Framework, creating harmonised regulations to enhance compliance and interoperability.

The other pillar is infrastructure, which involves modernising and expanding payment systems to enable faster, cost-effective transactions, including enhancements to the East African Payment System (EAPS).

It is also anchored on inclusivity by ensuring equitable access to payment systems for individuals, businesses, and financial institutions across all Partner States.

The Plan’s fourth pillar is capacity building to strengthen technical expertise and financial literacy to support sustainable modernisation efforts.

The Master Plan tackles key obstacles such as fragmented regulations, high transaction costs, and limited interoperability by outlining twenty targeted initiatives.

It identifies several critical challenges, including fragmented regulatory frameworks, limited interoperability between national and regional payment systems, high transaction costs, slow settlement processes, gaps in financial inclusion, and weak consumer protection mechanisms.

Additionally, challenges in cross-border data-sharing and risk management hinder the efficiency of payments across Partner States.

By addressing these issues, the Master Plan seeks to create a more seamless and integrated payments ecosystem that will enhance trade, investment, and economic growth across the region.

Notably, the roadmap aligns with global best practices, including the implementation of ISO 20022 as a standardised messaging protocol to facilitate electronic data exchange between financial institutions.

Further, the Master Plan proposed the exploration of Central Bank Digital Currencies (CBDCs), digital forms of a country’s fiat currency issued and regulated by the central bank, for regional transactions.

The Plan proposes targeted initiatives such as the development of a mutual recognition framework for cross-border Payment Service Provider (PSP) licensing and a harmonised regulatory framework for mobile money and e-wallet transactions.

It also focuses on enhancing interoperability through a regional instant retail payment switch, fostering public-private collaboration via a regional payments system forum, and strengthening consumer protection measures.

Additionally, it explores the adoption of emerging technologies such as AI and cloud computing to further modernise cross-border payments across the EAC region.

The rollout of the Master Plan is anticipated to occur in three phases, whereby in the short term or within two years, it will address regulatory harmonisation, foundational infrastructure upgrades, and capacity-building initiatives.

In three to five years, it will ensure full interoperability of Partner States’ payment systems and operationalisation of the regional instant retail switch; and in the long term, it is expected to be set to enhance deeper regional integration, alignment with global payment networks, and adoption of emerging financial technologies.

****

URN