On 3 March 2025, the South African Reserve Bank (SARB) published a draft directive entitled ‘Directive in respect of specific payment activities within the national payment system’ (Draft Directive) simultaneously with a draft exemption notice entitled ‘Designation by the Prudential Authority of specific activities conducted in the national payment system which shall be deemed not to constitute ‘the business of a bank’ under paragraph (cc) in section 1(1) of the Banks Act, 1990’ (Exemption Notice).

While the purpose of the Draft Directive is to prescribe regulatory requirements for conducting prescribed payment activities, the purpose of the Exemption Notice is to exempt the payment activities that technically qualify as ‘the business of a bank’ from the requirements of the Banks Act, 1990 (Banks Act).

The Draft Directive prescribes, inter alia, authorisation, governance, prudential, fitness and propriety, client funds safeguarding, data protection, and reporting requirements for persons (both banks and non-banks) who conduct or seek to conduct any of the following payment activities:

• acquiring of payment transaction – contracting with a payee to accept and process payment transactions that result in a transfer of funds to the payee;
• card credit payment instruction – a payment instruction resulting in the credit of funds to a payment account linked to a card;
• electronic money – electronically stored monetary value issued on receipt of funds and represented by a claim on the issuer, which is generally accepted as a means of payment by persons other than the issuer and is redeemable for physical cash or a deposit into a payment account on demand (including mobile money where an electronic wallet service allows users to store, send and receive money using their mobile phone);
• execution of payment transactions – execution of payment transactions, including transfers of funds on a payment account with the user’s payment service provider or another payment service provider (including execution of debit orders such as once-off direct debits and authenticated collections, execution of payment transactions through a payment card or similar device, and execution of credit transfers such as standing orders);
• faster payments – providing an electronic service in which both the transmission of the payment message and the availability of funds to the payee occur in real time or near-real time, on a basis that the service is available 24 hours a day and seven days a week;
• issuing of payment instruments – contracting with a payer to provide a payment instrument to initiate payment instructions;
• provision of payment account or store of value – providing an account or store of value held in the name of one or more payer or payee which is used for the execution of payment transactions;
• provision of third-party payment – payee service provider (accepting funds or the proceeds of payment instructions from multiple payers on behalf of a beneficiary), and payer service provider (accepting funds or the proceeds of payment instructions, from a payer to make payment on behalf of that payer to multiple beneficiaries) (TPPP Payment Activities);
• money remittance – a service for the transmission of funds (or any representation of monetary value), with or without any payment accounts being created in the name of the payer or the payee, where (a) funds are received from a payer for the sole purpose of transferring a corresponding amount to a payee or to another payment institution acting on behalf of the payee, or (b) funds are received on behalf of, and made available to, the payee;
• clearing – the exchange of payment instructions;
• settlement – the discharge of settlement obligations;
• provision of a scheme – providing a set of formal, standardised and common binding rules governing the relationship between payment institutions or members of a scheme to provide payment instruments for the transfer of funds, or making and receiving payments, between or by end-users; and
• participation in a scheme – Participation in a scheme as admitted by a scheme in terms of its entry and membership criteria.

It is noteworthy that the persons who conduct TPPP Payment Activities will be exempt from several significant requirements of the Draft Directive.

In addition, the Draft Directive prescribes that any person seeking to operate a closed-loop payment system or offer a closed-loop payment activity must be registered with the SARB (although such a person will not be considered as a payment institution and will not be required to comply with most of the requirements of the Draft Directive).

A ‘closed-loop payment system or payment activity’ is a payment system or payment activity that is not interoperable with other payment systems, and the payment service provider is the same entity or part of the same group as the payment service provider of the payee, with transactions limited to a specific network or ecosystem. This will be a significant change as the issuance of closed-loop payment instruments, which are currently unregulated save under the Consumer Protection Act, 2008 (such as gift cards), will become regulated and be subject to registration under the Draft Directive.

On a positive note, the Exemption Notice seeks to exempt the following payment activities that involve the pooling of funds into a store of value or payment account by a person other than a bank for the purpose of conducting payment activities, from the definition of ‘the business of a bank’ as outlined in the Banks Act, subject to the prescribed conditions:

• acquiring of payment transactions;
• card credit payment instructions;
• execution of payment transactions;
• electronic money;
• faster payments;
• issuing of payment instruments;
• money remittance; and
• provision of payment account or store of value.

The eight payment activities to be exempted under the Exemption Notice are currently considered by the SARB as the business of a bank and can only be offered by a bank or a non-bank in partnership with a bank. The Exemption Notice will enable non-banks that are authorised under the Draft Directive to offer these payment activities.

Both the Draft Directive and the Exemption Notice are in draft form and are available for public comments until 16 April 2025.

The Draft Directive and the Exemption Notice, together with their public comments templates, are available here under the tabs NPS regulation /Consultation. documents’.

Written by Kirsten Kern, Partner and Head of Financial Services Regulatory, and Bright Tibane, Partner, Bowmans