Deputy Governor Francois Groepe: PASA International Payments Conference

Opportunities and challenges: the South African national payment system : An address by Mr Francois Groepe, Deputy Governor of the South African Reserve Bank, at the PASA International Payments Conference, Sandton Convention Centre

1. Introduction

Ladies and gentlemen, good morning.

It is an honour and a pleasure to address the second PASA International Payments Conference, and I would like to thank the organisers for the invitation to open the proceedings.

The timing of this conference is highly appropriate as we are entering a new phase in the South African payment and financial regulatory environment, coupled with significant changes to the international regulatory architecture and framework.

Not only do we have to contend with challenges in our domestic environment, but we need to be cognisant of the challenges facing the global economy, such as pedestrian growth, low commodity prices, increased geopolitical risks, and a high degree of market uncertainty and volatility. All these factors combined make the economic and financial environment very challenging and rapidly evolving.

This morning, I will take a look at the current payment system landscape, highlighting some of the opportunities and challenges that we can expect to face in the near future and where we, the regulators, would like to see the national payment system in the next few years.

2. Legislation, regulation, governance, and the South African national payment system

The South African payment system has not escaped the fallout of the most recent global financial crisis. Following the crisis, global regulators increased their scrutiny of payment systems and of financial market infrastructures (or FMIs). This has resulted in numerous regulatory reforms, including legislation to strengthen the financial regulatory architecture.

South Africa will have new, far-reaching and overarching, financial sector legislation by the end of 2016. From a payment system perspective, it will include the introduction of new and more comprehensive regulations as well as expanded oversight and supervision by various regulators.

Furthermore, as you are aware, the Committee on Payments and Market Infrastructures (or CPMI) of the Bank for International Settlements (BIS) as well as the International Organisation of Securities Commissions (IOSCO)1 published new principles for FMIs in April 2012.

As a result of the new international and domestic regulatory requirements, as mentioned above, it has become necessary to re-evaluate the National Payment System Act 78 of 1998 (NPS Act). The factors that will have to be taken into account include access and participation criteria, licensing criteria in line with international standards for FMIs, the governance arrangements in the payment system, as well as the role of the payment system management body, including that of a self-regulatory organisation (SRO).

As part of this work, the South African Reserve Bank (SARB) commissioned an assessment of the effectiveness of the payment system management body, namely the Payments Association of South Africa (PASA). The purpose of the review, known as the PASA Effectiveness Review, was to address any inadequacies in the regulation of the participants in the payment system and to evaluate the role of PASA in assisting the SARB in discharging its mandate. The SARB published the report last week.

The recommendations of the PASA Effectiveness Review cover four themes, namely mandate and strategy, the governance framework, the regulatory model, and membership. I would like to highlight some of the main findings and recommendations contained in this report.

The report found that the PASA mandate was too restrictive and that it disadvantaged non-banks, hence it proposes that the PASA mandate be clarified and that it be expanded to include non-banks such as card networks, card associations, retailers, and merchants.

Regarding the governance framework, the review found that the PASA Council was not adequately representative of the rapidly changing payments environment and of the various categories and levels of participation and participants in the national payment system.

In order to strengthen the governance framework, it is recommended that the PASA Council be composed of a majority of independent non-executive councillors, representative of all the stakeholders in the national payment system and better reflecting our country’s demographics.

As far as the regulatory framework is concerned, it was found that there were deficiencies relating to the enforcement framework and that the self-regulating model impacted on the objectivity of the payments clearing house (or PCH) environment.

In order to enhance the credibility of our regulatory framework, it is important that compliance be enforced in a consistent, fair and transparent manner, hence it is proposed that an independent Compliance Enforcement Committee be established. Read more [PDF]

More on

Share this page

Similar categories to explore