The Reserve Bank has exempted certain payment activities from the definition of “the business of a bank” to speed up non-bank access to the national payments system (NPS) before an amended NPS Act takes effect
A regulatory framework supports the exemption notice to ensure that entities undertaking these exempted payment activities are effectively regulated, supervised and overseen under the NPS framework, thereby mitigating risks within the NPS and the broader financial system.
The Bank is forging ahead with deep regulatory reforms to introduce new non-bank players into the system, allowing them to offer services such as issuing e-money and providing acquiring services without requiring full NPS licences.
According to the draft exemption, the Bank will exempt seven payment activities, including the issue of electronic money and payment instruments, the provision of third-party payments, money remittances and clearing and settlement activities.
This opens the door for fintechs to get into the NPS, in one of the most fundamental reforms to the payments architecture in many years.
According to the draft directive accompanying the exemption, moves are afoot to amend the act.
“This directive aims to promote competition, innovation and financial inclusion in the NPS. With technological advancements, non-banks are increasingly participating in the payment ecosystem,” the directive reads.
“Non-banks were previously restricted from holding client funds in the absence of a sponsorship arrangement with a licensed bank or a third-party payment provider registration, where payment is due.”
The draft NPS Bill has circulated at the Reserve Bank, the Prudential Authority, the National Treasury and the Financial Sector Conduct Authority for comment.
The SA Reserve Bank is drafting legislation to revamp the national payments ecosystem, setting the stage for the biggest payments reforms in a generation and a potential 0.5% boost to GDP growth.
Under the Bank’s 2030 strategy, which elevates the modernisation of payments to a core strategic pillar alongside price and financial stability, it estimates that faster, cheaper digital payments could trim the economy’s R30bn annual cash-management cost and widen access for underserved households and businesses.
The Bank is setting its sights on propelling the country’s NPS to the big league among emerging markets and sweeping cash to the sidelines. Through its payments ecosystem modernisation programme, the bank has ploughed “significant” capital into next-generation rails, real-time settlements and digital wallets
The Bank is drawing lessons from fellow Brics countries in modernising its payments system, particularly Brazil and India.
The Bank has pointed to India’s Unified Payments Interface (UPI) as one example of a recent reform that has yielded positive results. The UPI provides a real-time, interoperable payment platform that supports multiple uses, including peer-to-peer transfers, bill payments and merchant transactions.
UPI in 2023/24 processed 131-billion transactions, accounting for 80% of the retail payments across India.
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