South African Reserve Bank Act, 1989 (Act No. 90 of 1989)

Notices

Directive for conduct within the national payment system in respect of domestic card transactions

1. Background
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1.1 In terms of section 10(1)(c) of the South African Reserve Bank Act 90 of 1989, as amended (SARB Act), the South African Reserve Bank (SARB) is required to perform such functions, implement such rules and procedures and, in general, take such steps as may be necessary to establish, conduct, monitor, regulate and supervise payment, clearing or settlement systems. Furthermore, the National Payment System Act 78 of 1998 (NPS Act) provides for the management, administration, operation, regulation and supervision of payment, clearing and settlement systems in the Republic of South Africa, and for connected matters.

 

1.2 The national payment system (NPS) encompasses the entire payment process, from payer to beneficiary, and includes settlement between banks. The process includes all the tools, systems, instruments, mechanisms, institutions, agreements, procedures, rules or laws applied or utilised to effect payment. The NPS is a primary component of the country’s monetary and financial system as it enables the circulation of money, assisting transacting parties to make payments and exchange value.

 

1.3 In terms of section 12(1) of the NPS Act, the SARB may, from time to time, and after consultation with the payment system management body (PSMB), issue directives to any person regarding a payment system or the application of the provisions of the NPS Act. The considerations for issuing a directive take account of the integrity, effectiveness, efficiency and security of the NPS and national financial stability as well as any other matters that the SARB considers appropriate.

 

1.4 The issuing of a directive may require a person to cease or refrain from engaging in the act or course of conduct to remedy the situation or perform such acts necessary to comply with the directive and effect a change.

 

1.5 A payment system enables payments to be effected or facilitates the circulation of money, and includes any instruments, procedures and rules for the transfer of funds between or among participants. Therefore, payment instruments such as cards are included within the definition of a payment system.

 

1.6 Instances exist where card transactions are concluded between South African cardholders and merchants, but the issuing of the card and/or the acquiring of these card transactions are provided by an entity that is not registered or incorporated in South Africa. Therefore, although the transactions occur in South Africa between domestic parties, such transactions are processed as if they were international or cross-border transactions by the foreign issuing and/or acquiring entities.

 

1.7 The conduct described in 1.6 above results in the circumvention of the South African legislative and regulatory framework, including the applicable rules.