Contributor: Tatiana Rall (Marketing and Communications Coordinator) and Steven Maier (Chief Brand Officer) from Amplifin
The National Payment System (NPS) is the backbone of the South African economy, allowing for the smooth circulation of money within the country. However, for this system to remain sustainable, secure, and efficient whilst also protecting consumers from fraudulent activities, it requires effective regulation.
The NPS encompasses the entirety of the payment process. This includes all systems, mechanisms, institutions, agreements, procedures, rules, and laws involved in the processing of payment instructions until the transaction is fully settled between banks.
The protectors of South Africa’s payment ecosystem: A look at the vital roles of the South African Reserve Bank, the Payment Association of South Africa, and Payment Clearing House Agreements
Regulating the NPS falls under the purview of the South African Reserve Bank (SARB) Act, which mandates the SARB to oversee the regulation of the NPS. The NPS Act further dictates that the SARB recognise a Payment System Management Body (PSMB) to manage and regulate its member’s participation in the NPS. Currently, the Payment System Management Body responsible for this function is the Payments Association of South Africa (PASA) – an industry association established in 1996 to represent the interests of participants in the NPS.
PASA is recognised by the SARB as a self-regulatory organisation with one of its key responsibilities being the development of policies and position papers to regulate its members’ activities within the NPS.
These policies and position papers are developed by PASA in consultation with various stakeholders, including its members and the SARB, which has final approval of all policies and position papers. Once approved, these policies and position papers become binding on PASA members and are enforced by the SARB through its oversight of the NPS.
They cover various aspects of the payment ecosystem, including the use of payment instruments such as cards and mobile payments, the processing of transactions, and the settlement of payments between participants.
In addition to PASA, the NPS also includes Payment Clearing Houses, which are responsible for the clearing and settlement of payments between participants. Each of these clearing houses are subject to the Payment Clearing House Rules, which are developed and enforced by the SARB on all Payment Clearing Houses.
Payment Clearing House Agreements, on the other hand, set out the terms and conditions under which participants use the clearing houses to settle their payments. These agreements cover many issues, including the parties’ rights and obligations, the fees payable for using the clearing houses, and the dispute resolution mechanisms in place.
Ensuring compliance within the regulatory framework
As one can see there are various components to the regulatory framework that make up the NPS and compliance with the rules and regulations that make up this framework are non-negotiable for businesses participating in the NPS. To help ensure compliance, Systems Operators (SOs), Third Party Payment Providers (TPPPs), and banks offer a valuable service in the form of compliance audits. These audits are conducted to assist their clients/users in meeting the regulatory requirements and avoiding the profound consequences of non-compliance. While SOs, TPPPs, and banks facilitate these audits, they are not responsible for the creation of the regulations themselves.
It is important to note compliance audits are not intended to be punitive but are conducted for businesses’ benefit to ensure they operate in a safe, efficient, and transparent manner. Compliance with the rules and regulations governing the NPS is essential for maintaining the integrity of the system and ensuring that payments are processed and settled in a timely and secure manner.
To summarise, the regulatory framework of the NPS in South Africa is designed to promote the safety, efficiency, and integrity of the system. As such, compliance with the regulations governing the National Payment System in South Africa is not only a legal obligation but a crucial factor to ensure the security and stability of the payment ecosystem.
Key take aways
- The SARB plays a critical role as the overarching regulatory body, with PASA responsible for developing and implementing policies and procedures to ensure that its members operate in a safe, efficient, and transparent manner.
- Payment Clearing Houses are responsible for the clearing and settlement of payments between participants, with the Payment Clearing House Agreements setting out the terms and conditions under which participants use the clearing houses to settle their payments.
- Compliance audits are conducted to ensure that businesses comply with the rules and regulations governing the NPS.
- Non-compliance can lead to profound consequences for businesses including fines, penalties, legal action, and even exclusion from operating in the NPS.
For more information about Amplifin, please visit https://amplifin.co.za/ or call us on 012 993 8383.