Reserve Bank moves to let fintechs process payments without going through a bank

South Africa’s non-bank payment providers would be able to process payments without routing them through a bank under proposals the Reserve Bank is working on, governor Lesetja Kganyago said this week.

As MyBroadband reported on 21 October, Kganyago set out the plan in an address in Pretoria. At present anyone who wants to reach the payment system has to go through a bank. The Reserve Bank proposes to change that with a new Exemption Notice and Authorisation Framework, which would replace the institution-based route with an activity-based one.

The reasoning Kganyago gave turns on what banks do that payment firms do not. Banks borrow short-term money, often repayable at short notice, and invest it in long-term assets. That maturity transformation carries risks that have produced financial crises before, which he described as a powerful justification for rigorous banking regulation. Payment firms, he said, do not engage in maturity transformation, and so do not need to be treated in the same way as banks.

“We recognise that there are some payment activities that do not require a banking licence,” Kganyago said.

Non-banks that qualify would still face requirements on governance, safeguarding of customer funds, operational resilience and reporting. “Regulation should identify the risks, apply proportionate safeguards and drive innovation in the market,” he said.

The governor also announced that PayShap, the country’s real-time interbank payment service, has processed R1 trillion across 1 billion transactions since it launched in 2023. PayShap is run by PayInc, the clearinghouse formerly known as BankServAfrica, which was renamed after the Reserve Bank took a 50% stake. Absa, FNB, Standard Bank and Nedbank launched the service with BankServAfrica in 2023, with the Reserve Bank involved through the Payments Association of South Africa. Before PayShap there was no real-time interbank digital payment facility in the country, and the Reserve Bank had been working on the idea since at least 2018.

For all the milestone, Kganyago said PayShap is far from ubiquitous. Card transactions and EFT credits still carry far higher volumes. He pointed to the different pricing models and transaction limits the banks apply to PayShap, and to low public awareness. Many South Africans, he said, simply do not know the service exists.

“A national instant-payment service cannot feel like a different product depending on where a customer banks,” he said. Promotion, he added, cannot be left to occasional product campaigns and requires sustained, coordinated customer education.

He also raised the prospect of extending PayShap beyond transfers between accounts to buying goods and services. “Its economic value will grow when customers can use it not only to send money, but also to pay for goods and services,” he said. “We want it to become part of everyday life, as ubiquitous as cash.”

The practical effect for a South African reader sits in two places. A fintech that today must work through one of the big five banks to move money would, under the proposal, be able to apply directly to perform specified payment activities. And a PayShap user would, on the governor’s account, be entitled to expect the same experience and the same limits whether they bank with Standard Bank, Absa, FNB, Nedbank or Capitec. Neither change is in force yet. The framework has been proposed, and the Reserve Bank has not said when it will be finalised.