SOUTH AFRICA: SARB’S NEW PAYMENTS FRAMEWORK TO STRIP BANKS OF EXCLUSIVE MONOPOLY

In a monumental shift poised to redefine the nation’s financial landscape, the South African Reserve Bank (SARB) has unveiled its third draft of proposed amendments to South Africa's payments regulatory framework. The landmark overhaul signals a massive transition toward an activity-based regulatory regime, systematically lowering barriers to entry for non-bank entities and setting the stage for a highly competitive fintech boom.

Released under the umbrella of the central bank's Payment Ecosystem Modernisation (PEM) programme, the newly published guidelines include a draft Authorisation Framework directive under the National Payment System (NPS) Act and a draft exemption notice under the Banks Act. Together, these documents lay the groundwork for non-bank providers to operate independently within the national financial ecosystem.

Leveling the Playing Field

Historically, any activities involving the pooling of public funds  such as e-money issuance and money remittances fell squarely under the definition of the "business of a bank." This statutory gatekeeping forced innovative fintech firms and non-bank providers to rely heavily on complex, costly bank sponsorship arrangements just to participate in the National Payment System (NPS).

The newly proposed framework shatters this monopoly. By pivoting to an activity-based approach, regulation will now attach to the nature of the payment activity rather than the type of institution performing it. For the first time, fintechs and financial institutions alike will have the choice to either maintain traditional bank sponsorship or secure autonomous authorization to operate in their own right.

Defining the Digital Frontier

The detailed Authorization Framework explicitly clarifies and categorizes domestic payment activities into a modular structure, enabling risk-calibrated oversight. Key defined areas include:

• E-Money and Mobile Money: Defined as digital stores of fiat currency value constituting a claim against the issuer at face value.

• Money Remittance: Account-based or standalone transactions transferring funds domestically between payers and payees.

• Payment Initiation & Acquiring: Services facilitating the seamless processing and transfer of payment instructions.

Notably, the framework distinguishes between "closed-loop" (limited networks) and "open-loop" (interoperable) payment systems. It also explicitly excludes cross-border transactions and differentiates traditional e-money from crypto and tokenized assets, which are handled under alternative scopes.

Proportionate but Stringent Compliance

While the SARB aims to foster financial inclusion and innovation, the new regime does not compromise on safety. The framework introduces comprehensive baseline requirements that all authorized entities must meet. These include minimum capital thresholds, ongoing transaction-linked capital buffers, and strict rules mandating that client funds be completely segregated from institutional assets.

Furthermore, robust governance standards, "fit-and-proper" personnel requirements, cybersecurity obligations, and strict anti-money laundering (AML) and counter-terrorist financing (CTF) compliance form the backbone of the new oversight model. Crucially, the regulations will follow a proportionate approach, using specific transaction volume thresholds to trigger the transition into a fully regulated environment ensuring that smaller, early-stage startups are not stifled by immediate administrative burdens.

The Final Countdown for Industry Input

Once officially implemented, this sweeping reform will completely replace several legacy regulatory instruments, including Directive No. 1 of 2007 (Payments to Third Persons) and the 2009 Electronic Money Position Paper.

For market participants, the clock is ticking. The SARB has opened the floor for industry feedback, inviting stakeholders to submit comments on the proposed drafts by 15 June 2026. Central bank discussions indicate that the SARB aims to publish the finalized, binding version of the Authorisation Framework in the third quarter of 2026.

Fintech leaders, traditional commercial banks, and payment service providers are urged to urgently audit their compliance, business models, and existing bank-led partnerships. This upcoming final draft represents the definitive moment for the industry to shape the rules of a modernized, inclusive, and fiercely competitive South African financial sector.

West Arekamhe