They also help to limit the cost and risks of settlements that could hinder economic activity. The degree of oversight is dependent on the risks posed by the payment system.
Why we regulate
The National Payment System Department (NPSD) has a core responsibility of promoting the overall effectiveness, integrity, safety, efficiency and stability of the NPS through its regulatory mandate. The integrity mandate extends to the prevention of the use of the NPS for financial crime, in particular, fraud, money laundering and financing of terrorism. In regulating the NPS, the NPSD takes into account the need for innovation, competition and financial inclusion. Consumer protection in the NPS is the responsibility of the Financial Sector Conduct Authority in terms of the Financial Sector Regulation Act 9 of 2017.
Who we regulate
The NPSD regulates the payment systems, the financial market infrastructures (FMIs), settlement systems, payment clearing house system operators, system operators, third-party payment providers, e-money providers, and participants in the NPS, including settlement participants and clearing system participants. Access to the NPS is through designation or authorisation as provided for in the National Payment System Act 78 of 1998 (NPS Act) and directives.
How we regulate
Section 10(1) (c) of the South African Reserve Bank Act 90 of 1989 enables the NPSD to regulateate the NPS. The primary legislative and regulatory framework for the NPS is provided for in the NPS Act. In order for the NPSD to achieve the policy and regulatory objectives of promoting the effectiveness, integrity, safety, efficiency and stability of the NPS, the NPSD executes its regulatory responsibility through the development of policies and issuance of legally binding directives. The NPSD also periodically issues non-binding position and information papers to affirm and clarify its policy position on specific payment system issues. These documents set out approaches, procedures and policy matters that are applicable and, although not legally binding, carry moral suasion. Development of policy positions, legislative and regulatory frameworks, including directives, follows a consultative process with the payments industry and broader stakeholder community. In terms of the NPS Act, the NPSD has the power to recognise a Payment System Management Body which formulates rules for the participants in the NPS. The NPSD coordinates with other regulatory authorities and ensures that the regulatory framework aligns with applicable international, regional and domestic standards.
Draft directive domestic processing
Joint Consultation On Processing Of Electronic Funds Transfers In Accordance With Recommendation 16 Of The Financial Action Task Force (FATF)
The Financial Intelligence Centre (FIC) together with the National Payment System Department (NPSD) of the South African Reserve Bank (SARB) are calling for comment on (i) SARB FATF EFT draft Directive 1 of 2019 (Annexure B), (ii) the FIC draft Guidance Note 102 (Annexure C), as well as (iii) their joint consultation paper. Comments are invited from accountable institutions on the joint consultation document, the draft Directive 1 of 2019 and the draft Guidance Note 102. Comments must be provided no later than Tuesday, 15 October 2019, to the FIC via e-mail on Consult@fic.gov.za and also to the SARB NPSD via e-mail on firstname.lastname@example.org.
Processing of Payments in South Africa - Comments due by 18 Dec 2018
Collection of Payment Instructions for Authenticated Collections
Reviewing the cheque limit
Reforms of the regulatory model for the South African national payment system
Joint consultation paper
Notice 2459 of 2004 — CLS
Designation of continuous linked settlement (CLS) system as a designated settlement system
In terms of section 12 of the NPS Act, 1998 (Act No 78 of 1998 as amended - the Act) the SARB may after consultation with the payment system management body, issue directives to any person regarding a payment system or the applications of the provisions of the NPS Act.
Amendment of the effective date for Directive 01 of 2020 (Gazette date 11 September 2020)
The directive for conduct within the national payment system in respect of domestic card transactions.
Second Amendment of the Directive for conduct within the National Payment System in Respect of the Collection of Payment Instructions for Authenticated Collections
Directive 02 of 2020 COVID-19 Directive for NPS
Matters related to precautionary measures to limit the spread of Coronavirus
Directive 01 of 2020
In respect of domestic card transactions
First Amendment of Directive 01 of 2017 - as at 14 December 2018
Amendment of the Directive for conduct within the National Payment System in Respect of the Collection of Payment Instructions for Authenticated Collections
Interpretation note for Directive 1 of 2015
Interpretation note for Directive 1 of 2015
Directive 01 of 2015
In respect of the Financial Action Task Force recommendations for electronic funds transfers
Directive 02 of 2007
In respect of system operators
Directive 01 of 2007
In respect of payments to third persons
Directive 02 of 2006
In respect of banks involved in the collection of payment instructions in the early debit order (EDO) payment clearing houses (PCHs)
The SARB publishes position papers in order to state its position on specific payment system issues. These documents normally contain approaches, procedures and policy matters, which apply at a particular time.
Position paper 01 of 2018
Position paper on the Principles for Financial Market Infrastructures published by the Committee on Payments and Market Infrastructures and the Technical Committee of the International Organization of Securities Commissions
Position paper 02 of 2014
Position paper on Virtual Currencies
Position paper 01 of 2014
Position paper on the Interbank Settlement Application Interfaces
Position paper 02 of 2013
Position paper on Common Monetary Area (CMA) Cross-border Payments
Position paper 01 of 2013
Position Paper confirming the SARB’s support for the Principles for Financial Market Infrastructures published by the Committee on Payment and Settlement Systems and the Technical Committee of the International Organisation of Securities Commissions
Position paper 02 of 2011
Position paper on Access to the National Payment System
Position paper 01 of 2011
Position paper on Interoperability
Position paper 01 of 2010 — This position paper is superseded by position paper NPS 02/2013
Position paper on CMA Cross-border Payments
Position paper 01 of 2009
Position paper on Electronic Money
Position paper 03 of 2008
Position paper on Cost-recovery Policy for the SARBLink Interbank Settlement Network
Position paper 02 of 2008 — This position paper is superseded by position paper NPS 01/2014
Position paper on Interbank Settlement Network Security Architecture
Position paper 01 of 2008 — This position paper is superseded by position paper NPS 01/2014
Position paper on Interbank Settlement Network
Position paper 01 of 2007
Position paper on Bank Models in the National Payment System
Position paper 02 of 2006
Position paper on the Intraday Monitoring & Utilisation of the Liquid Asset Requirement Holdings & the Cash Reserve Account
Position paper 01 of 2003
Position Paper on Cost-Recovery Policy for the South African Multiple Option Settlement (SAMOS) System
Position paper 01 of 2001 — This position paper is superseded by position paper NPS 02/2013
Position paper on CMA Cross-border payments (as amended)
Position paper 01 of 2000
Position paper on Risk Reduction Measures for Payment Clearing Houses in the NPS
Information papers are divided into two categories:
1. Documents that complement current position papers by the industry; and
2. Documents that were utilised as position papers by the payment industry, but lapsed in terms of the duration and/or relevance. These documents are used for, among other things, research and historical reference.
Information paper NPS06 (related to position paper 01 of 2013)
The South African Reserve Bank National Payment System Department’s commitment to the Principles for Financial Market Infrastructures in the National Payment System
Information paper NPS04
South Africa’s participation in the Continuous Linked Settlement System
Information paper NPS01
Intraday Funding and Collateral Policy in the South African Multiple Option Settlement system – July 2001
Notice to all stakeholders in the national payment system on instant EFT online payments
Notice to all stakeholders in the national payment system on the exiting of cheques
Notice to all stakeholders in the NPS on the reduction of the cheque item limit from R500 000 to R50 000
Sort at source notice
Notice to all stakeholders in the NPS on sort at source
Notice on payroll deductions
Notice to stakeholders in the NPS, financial institutions and other non-bank institutions on payroll deductions in South Africa.
Oversight and supervision
The Bank for International Settlements defines oversight of payment and settlement systems as a central bank function. The purpose of oversight is to promote safety and efficiency by monitoring and assessing existing and planned systems and, where necessary, inducing changes.
The SARB is legally responsible for providing oversight of the NPS. The South African oversight model has been developed and refined to cater to the domestic payment system and adheres to international best practice. The main objective of oversight is to reduce systemic risks that could arise from legal, liquidity, credit, operational, settlement or reputational risks in the payment system. Oversight spans the entire process of effecting payment, from enabling a payer to make payment to the receipt of funds by the beneficiary.
A payment system, as defined by the Bank for International Settlements (BIS), consists of a set of instruments, banking procedures and interbank funds transfer systems that ensure the circulation of money.
A national payment system is one of the principal components of a country’s monetary and financial system and is, therefore, crucial to a country’s economic development, since almost all economic transactions involve some form of payment. Payment and settlement systems thus play a crucial role in a market economy, and central banks have always had a close interest in them as part of their responsibilities for monetary and financial stability.
Well-designed and well-managed payment systems help to maintain financial stability by preventing or containing financial crises, and help to reduce the cost and uncertainty of settlement, which could otherwise impede economic activity. Financial instability may be characterised by banking failures, intense asset price volatility, interest and exchange rate volatility, liquidity problems, and systemic risk, which often manifest in the disruption of the payment and settlement system.
Payment systems encompass the total payment process, including systems, mechanisms, institutions, agreements, procedures, rules and laws. Modern payment systems also involve the settlement of substantial trade in financial instruments such as bonds, equities and derivatives.
Collegiality, cooperation and interoperability are vital elements of a world-class payment system.
Principles for Financial Market Infrastructure (FMI) Workshop — 20-21 September 2012
Opening remarks — Mr Tim Masela (SARB)
An Authenticated Collections mandate is a type of debit order that allows a user to confirm the details of a contract with their bank before the debit order is processed. The Authenticated Collections (AC)/DebiCheck system is part of a broader strategy to combat abuse of the national payment system. The project aims to ensure that the early debit order collection system is safe and efficient. It ensures that a secure early debit order is approved and authenticated by the paying customer upfront for future-dated debit orders.
The AC/DebiCheck Project addresses growing concerns about the high number of disputes relating to customer complaints of unauthorised debits, user complaints of legitimately approved transactions and rogue activity by collecting users.
The SARB oversees the AC/DebiCheck Project and ensures that all stakeholders in the collections industry comply with the directives put in place to ensure the safety and efficiency of the national payment system. Initially, the SARB issued terms of reference to the payment collections industry to build systems that strengthen mandates given by paying customers to curb debit order abuse. This resulted in the collections industry designing the DebiCheck system.
The SARB further issued the Directive for conduct within the national payment system in respect of the collection of payment Instructions for authenticated collections (Directive no. 1 of 2017), which governs the objectives and outcomes of the DebiCheck Project. This directive was amended in 2018 and in 2020.
There are 11 participating retail banks. The AC/DebiCheck system went live in August 2018. The official implementation date was 1 November 2019. All participating banks needed to have fully implemented the AC/DebiCheck system before then. The collections industry has until 1 November 2021 to migrate their existing authenticated early debit order (AEDO) and non-authenticated early debit order (NAEDO) back books to the new AC/DebiCheck system. The AEDO and NAEDO payment streams will be discontinued from 1 November 2021.
The Debit Order Abuse Project is an industry-wide initiative that seeks to address rogue practices by both user and consumer communities. The project’s strategic objectives are to:
In doing so, the Debit Order Abuse Steering Committee has established several initiatives to limit abuse in the early debit order and electronic funds transfer debit collections streams. These initiatives focus on high-risk user investigations, pre-onboarding and vetting of new and existing users, central user registrations, user visibility and changes in the current dispute regime.
For further information regarding the Debit Order Abuse Project, please contact the Oversight and Supervision Division of the NPSD or the Payments Association of South Africa at email@example.com.
Interchange refers to the process whereby banks, through their devices, systems and procedures, facilitate the acceptance, collection, exchange, clearance and settlement of payment instruments used by their customers within the NPS. Interchange encourages interoperability among payment infrastructures or facilities which is critical for the facilitation of payments. In this regard, the public is afforded the opportunity to utilise the available infrastructure or facilities to make payments. The banks then compensate one another via interchange for servicing each other's customers. The SARB embarked on the Interchange Determination Project (IDP) in 2011 to:
The IDP is underpinned by the following principles:
The launch of the IDP and the Feasibility Study on interchange
The SARB has launched a project to address interchange fees as applicable to each of the payment streams officially recognised and registered within the South African NPS. Interchange, as applicable to payment systems, refers to the process whereby banks, through their devices, systems and procedures, facilitate the acceptance, collection, exchange, clearance and settlement of payment instruments utilised by their customers within the National Payment System. Read more . . .
Determination of interchange for ATM, card and cash-back at point of sale
During 2009 and 2010, the SARBank was involved in discussions with the National Treasury (NT), the Department of Trade and Industry, and the Competition Commission (CC) to resolve issues in the Banking Enquiry Report (the Report) concerning interchange. Read more . . .
Review of the interchange determination process: 2020 — 2021
This communiqué advises that the project to review the interchange determination process has been launched. Read more . . .
Interchange Determination Project: adjustment of interchange rates for card-not-present transactions for both debit and credit cards from 21 September 2020 Read more . . .
ATM Interchange Rates Announcement
The purpose of this communiqué is for the SARB to share the results of the Bank- facilitated interchange determination project (IDP), with specific reference to the card phase. Read more . . .
Card Interchange Rates Announcement
The IDP was launched in 2011 and the SARB had since determined and implemented interchange for ATMs, cards and cash-back at point-of-sale devices (POS).
The first Interchange results were implemented in April 2014 for ATMs and for cards and cash-back at POS devices in March 2015. The interchange rates are reviewed annually and the latest are published as per the link below:
ATM and Card Interchange rates as revised from 12 June 2021 Read more . . .
The SARB is responsible for the oversight, supervision and regulation of the payment system financial market infrastructures (FMIs). The SARB adopted the Principles for Financial Market Infrastructures (PFMI) published by the Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions in April 2012.
In position paper 1 of 2018, the SARB identified FMIs within the national payment system and, after applying criteria provided in the PFMI, it recognised the following payment system FMIs as systemically important:
These payment system FMIs are required to observe the PFMI, conduct regular self-assessments against the PFMI, provide the NPSD’s Oversight and Supervision division with these self-assessments, and publish disclosure frameworks on their websites as prescribed in the PFMI disclosure framework and assessment methodology.
If you have further questions about regulation, oversight and supervision, please do not hesitate to contact us.