The South African Reserve Bank (SARB) has published the third version of its proposed amendment to the payments regulatory framework.
The amendments focus on two key instruments. These include a draft exemption notice that excludes certain payment activities from constituting “the business of a bank”, and a revised draft Authorisation Framework set out in a draft directive.
Activity-based regulation takes centre stage
The directive introduces a comprehensive activity-based regulatory regime. Stakeholders have until 15 June 2026 to submit comments. This marks a final opportunity to influence what is expected to become a foundational framework for the future of payments in South Africa.
This development builds on earlier rounds of consultation. It also advances the SARB’s work under the Payment Ecosystem Modernisation (PEM) programme. Under the current regime, activities involving the pooling of public funds, including e-money issuance and money remittance, generally fall within the definition of the “business of a bank”. As a result, non-bank providers typically rely on bank sponsorship arrangements to participate in the National Payment System (NPS).
The amended payments regulatory framework will allow both sponsored payment institutions and institutions seeking authorisation in their own right to participate.
The current payments regulatory framework will govern these amendments. The National Payment System Act (NPS Act) will govern the draft Authorisation Framework directive. Meanwhile, the Banks Act will govern the draft exemption notice.
Key payment activities under the new framework
The draft Authorisation Framework sets out the activities that fall within the definition of “payment activity” and require authorisation.
Industry participants should note and consider the following critical concepts and definitions from the draft Authorisation Framework:
| Payment activity | Definition and description |
| Acquiring payment instructions | A payment activity provided by a payment institution to a payee or payer to accept and process payment instructions. This results in a transfer of funds to the payee, irrespective of the payment instrument used by the payer. |
| Clearing | Has the same meaning as defined in the NPS Act. |
| Closed-loop payment system or closed-loop payment activity | A payment system or payment activity, including but not limited to the issuance of e-money, a payment instrument, or money remittance. It is not interoperable and is provided or conducted by a single service provider for intended use within a limited network or ecosystem. Both the payer and the payee, who are clients of the service provider, participate in the same payment system or payment activity provided by the service provider. |
| Crypto asset | For the purpose of the Draft Authorisation Framework Directive, a digital representation of value that a central bank does not issue. Natural and legal persons can transfer or store it electronically for payment purposes. It applies cryptographic techniques and/or uses distributed ledger technology. |
| E-money | A store-of-value product that: (i) is a digital representation of a fiat currency (legal tender); (ii) is a claim against the e-money issuer; and (iii) may be redeemed for money or transferred into a payment account at face value on demand. E-money is held for payment purposes and may be accepted by persons other than the issuer in an open-loop payment system. Alternatively, it may be accepted within the issuer’s network or ecosystem in a closed-loop payment system. For the purposes of this Directive, e-money includes ‘mobile money’. It is also referred to as Payment Account C and excludes Payment Account A, Payment Account B, crypto assets and tokenised assets. |
| Mobile money | A form of e-money provided through a store of value. It enables users to store, send and receive funds using a mobile device or mobile network. |
| Money remittance | A service for transmitting funds within South Africa, with or without payment accounts in the name of the payer or payee. This occurs where: (a) funds are received from a payer solely to transfer a corresponding amount to a payee or another payment institution acting on the payee’s behalf; or (b) funds are received on behalf of, and made available to, the payee. The categories of money remittances include: (i) funds-in, funds-out services based on a contractual relationship between the money remitter and payer; and (ii) funds-in, funds-out services involving a single instruction or transaction. |
| Open-loop payment system | A payment system operated by multiple payment institutions that provide interoperable payment methods and services, or payment activities referred to under Annexure B. This allows end users to make payments to any payee. |
| Payer service provider | A juristic person that accepts money or proceeds of payment instructions from a payer to make payment on behalf of that payer to multiple beneficiaries as a regular feature of its business. |
| Payment | The transfer of funds from a payer to a payee. |
| Payment execution | The ability of a payment institution to submit clearing and/or settlement instructions or process payment instructions for clearing or settlement purposes. |
| Payment initiation | An electronic service that initiates a credit payment instruction through a payment initiation service provider at the payer’s request with respect to a payment account held at a payment account service provider. |
| Payment instruction | An instruction as defined in the NPS Act. |
| Payment instrument | A physical or electronic tool or mechanism used to initiate a payment instruction that enables the transfer of funds from a payer to a payee. |
| Payment system | A payment system as defined in the NPS Act. It includes both closed-loop and open-loop payment systems. |
| Scheme | A set of formal, standardised and binding rules governing relationships between payment institutions. It may also refer to an agreed-upon arrangement that defines the functional, business, legal, and technical rules for executing payments using a particular payment instrument. |
| Scheme manager | The legal entity or body responsible for the governance, rule-setting and management of a scheme. This includes establishing, maintaining and enforcing the scheme’s rules, membership criteria and compliance framework. |
| Segregated account | A formal beneficiary account as defined in the Deposit Insurance Regulations issued under the Financial Sector Regulation Act, 2017 (Act No. 9 of 2017). It is held at a bank or as a settlement account of a designated settlement system participant, which is maintained in a designated settlement system. |
| Settlement | Has the same meaning as defined in the NPS Act. |
| Sponsorship | The process through which an authorised, designated or registered payment institution provides indirect access to the NPS for another entity. This includes access for a closed-loop payment system, as well as activities such as acquiring, clearing, settlement and payment to third persons, as contemplated in paragraph 8 of the draft Authorisation Framework. |
| Third-party payment | The acceptance of money or payment instructions by third-party payment providers as a regular business feature from another person. The purpose is to make payment on behalf of that person to a third party to whom the payment is due, as contemplated in section 7 of the NPS Act. |
| Third-party payment provider (TPPP) | A juristic person that provides third-party payment services. A TPPP may be a service provider and/or a beneficiary service provider as defined in the draft Authorisation Framework. |
| Tokenised Asset | A digital representation of a traditional asset on a programmable platform. |
Supporting innovation and competition
At the centre of the payments regulatory framework is an activity-based approach. Under this model, regulation attaches to the nature of the payment activity rather than the type of institution performing it. In practical terms, both banks and non-banks may offer payment services, provided they meet the relevant regulatory requirements.
The draft Authorisation Framework is detailed and establishes a structured regime for conducting payment activities within the NPS. It applies to any person, bank or non-bank seeking to perform defined payment functions. In addition, it sets out clear pathways for authorisation, designation and registration. It also introduces ongoing compliance obligations and enhanced supervisory and enforcement powers for the SARB.
A notable feature of the payments regulatory framework is its functional classification of payment activities. These include:
- issuing of e-money and payment instruments;
- acquiring of payment instructions;
- clearing and settlement;
- payment initiation;
- third-party payments;
- scheme management; and
- money remittance and scheme management.
This modular structure allows regulators to calibrate requirements according to the specific risk profile of each activity. Industry participants should note that crypto assets and tokenised assets are excluded from the definition of e-money. They should also note that the draft Authorisation Framework applies only to domestic payment activities. It specifically excludes cross-border payment activities.
Supporting innovation and competition
Although paragraph 4.3.4 specifically excludes closed-loop payment systems and activities from the scope of the draft Authorisation Framework, the framework also provides registration requirements for these systems and activities. Furthermore, it imposes a full range of ongoing compliance obligations. Consequently, the SARB will need to clarify the treatment of closed-loop systems and activities in the final version.
Once implemented, the draft Authorisation Framework will replace and repeal the following in their entirety:
- Directive for Conduct Within the National Payment System in Respect of Payments to Third Persons – Directive No. 1 of 2007;
- Directive in Respect of Issuing of Electronic Funds Transfer Credit Payment Instructions on Behalf of the Payer in the National Payment System – Directive No. 2 of 2024; and
- Position Paper on Electronic Money – Position Paper No. 1 of 2009.
The framework introduces comprehensive baseline requirements. These include minimum capital thresholds, ongoing capital buffers linked to transaction volumes or liabilities, and strict safeguarding rules for client funds. These safeguards include the segregation of client funds from institutional assets. In addition, governance standards, fit-and-proper requirements, risk management controls, cybersecurity obligations and compliance with anti-money laundering and counter-terrorist financing frameworks form central pillars of the regime.
Importantly, the payments regulatory framework also adopts a proportionate approach in certain areas. Defined thresholds will determine when activities transition into the fully regulated environment. This reflects an effort to balance oversight with innovation. As such, the framework links the trigger for authorisation applications to transaction volumes over specific periods.
Preparing for implementation
From a policy perspective, the reforms aim to strengthen competition, improve financial inclusion and support innovation within the payments ecosystem. By lowering barriers to entry for non-bank participants and enabling new business models, the SARB is positioning the NPS to better accommodate fintech development and evolving consumer needs. At the same time, it seeks to maintain system integrity, safety and efficiency.
For market participants, the consultation highlights the need for a careful assessment of the proposed framework. This includes determining how activities are classified, understanding the implications of direct authorisation and considering how existing bank-led arrangements may need to evolve.
As the consultation period closes in mid-June, stakeholders are encouraged to engage substantively with the proposals. The final framework is expected to have significant implications for banks, fintech firms and other payment service providers. It will shape the structure and competitiveness of South Africa’s payments landscape for years to come.
The SARB has indicated during industry discussions that it intends to publish the final version of the Authorisation Framework in the third quarter of 2026. Therefore, industry participants should treat this consultation process as the final opportunity to provide comments.
