End of an era for South Africa’s payments system

South Africa’s banks have lost the body through which they collectively governed the national payment system. On 2 September, the Reserve Bank’s recognition of the Payments Association of South Africa as the country’s payment system management body lapsed, ending a self-regulatory arrangement that had run for 27 years.

Pasa’s functions, staff and intellectual property have been split between the central bank and PayInc, the payments infrastructure company formerly known as BankservAfrica, in which the Reserve Bank holds a 50% stake.

The Bank issued the directive withdrawing recognition on 2 June, giving three months’ notice. The first tranche of functions moved across on 11 August; the rest, including everything going to PayInc, transferred by 2 September. The central bank said structural and operational challenges with the management-body model had made the decision necessary.

Nothing broke, which was the point. But the governance of the national payment system has been pulled apart and redistributed.

Speaking at a Standard Bank client briefing on Wednesday, Lesego Chauke – who until 1 September was Pasa’s chief payments officer and now holds the same title at PayInc – walked users of the payment system through what actually shifted.

The payment clearing houses, the structures in which participants agree the rules for each payment type, were divided along the system’s three pillars. Card and high-value payments, together with the committee structures beneath them, moved to the central bank, as did licensing, authorisation and registration of payment institutions. Low-value payments – the electronic transfers, debit orders and instant payments most South Africans use daily – moved to PayInc. Pasa staff followed their portfolios, Chauke among them.

What has not changed

Banks still sit in those structures. What they have lost is the non-profit they owned and funded, which held the mandate to organise and regulate their own participation in the system. Rule-making authority now sits with the central bank and with PayInc – and PayInc’s other 50% is held collectively by the participating commercial banks, so the arrangements behind the payment types ordinary South Africans use most have moved into an entity the banks half own. Whether the Reserve Bank uses its new authority to widen access to non-banks is the open question in the reform.

Chauke was emphatic that the rules themselves have not been rewritten. The payment clearing house rules by which banks and sponsored non-banks operate remain the same, as do the sponsorship and designation models, the risk management and compliance obligations, and the licensing position of system operators and third-party payment providers.

“From the day-to-day perspective, nothing changes in the eyes of the users,” she said. “The changes at this point are still very much in the backend, around the governance framework and the way forward.”

Running in parallel is the Reserve Bank’s payments ecosystem modernisation programme, which is where the substantive change sits. That programme is building PayInc into a national payment utility: a shared, open piece of infrastructure that banks, fintechs and other non-banks can plug into directly, rather than a bank-owned clearing house outsiders reach only through a sponsor.

Alongside it sits the authorisation framework being developed by the central bank’s national payment system department, and the National Payment System Bill, released for public comment on 1 September. Chauke said the Reserve Bank received “multiple hundreds of pages” of industry feedback on the draft framework and expects the next iteration around the first quarter of 2027.

The core idea is a move from regulating entities to regulating activities.

Nthabiseng Mohale, Standard Bank’s head of interbank and domestic payments, said this is the single most consequential shift for businesses. Widening participation lets non-banks perform activities that previously required a bank licence or a bank sponsor, but it does not lower the bar.

“Because you perform the same activity as a bank, whether you’re a bank or not, you will be expected to adhere to the same requirements,” she said. Governance, anti-money laundering and fraud controls, and operational risk requirements all follow the activity.

Several concrete changes are already visible in the industry’s work programme: the standardisation of PayShap, technical standards for QR and payment initiation, the eventual sunset of real-time clearing, amendments to the National Payment System Act, and a registration requirement for closed-loop systems, which the Reserve Bank does not encourage but accepts will exist. Closed-loop schemes will be permitted without full authorisation only below thresholds of R15-million in annual transaction value or one million customers. Third-party payment processors will be limited to two formal beneficiary accounts.

Cross-border transactions

Nthabiseng Sibanda, Standard Bank’s regional head of payments for Africa, said faster and cheaper cross-border payments depend on something unglamorous. “None of that happens without the underlying data being of quality,” she said, meaning accurate, complete and supported by relevant documentation.

The immediate deadline is ISO 20022, the global standard that replaces free-text payment fields with structured ones: street, town, city and country each in their own box, rather than a single line a screening engine has to guess at. Swift has pushed its industry activation date for structured addresses from 14 November to the first quarter of 2027 after finding readiness across regions remained uneven. Standard Bank has not moved with it.

“We are not changing the date,” Sibanda said. “We are remaining with what we have communicated all along, which is the 10 October date.” Companies that miss it risk delayed and returned payments, additional fees and missed supplier deadlines, particularly into high-disclosure markets such as China, Canada and the UK, where vague addresses are increasingly stopped.

Two other changes matter for anyone paying into the Southern African region:

• As of August, balance-of-payments purpose codes across the Common Monetary Area (CMA) have been aligned, so a code used in South Africa now means the same thing at the receiving bank in Namibia, Lesotho or Eswatini. Previously, a code that meant “import deposit” in one market could read as “advance payment” in another, and the payment stopped.

• A directive requires banks in the CMA to migrate low-value cross-border payments off the Sadc real-time gross settlement system onto TCIB, the region’s real-time low-value scheme, by March 2027. Clients initiate payments the same way; the routing decision happens behind the scenes.

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