National Treasury and the South African Reserve Bank have released a new policy paper which looks at a possible review of the National Payment System Act.
A national payment system (NPS) is a set of arrangements and infrastructures that enables consumers, businesses and other entities to transfer funds to one another.
In a media statement, the two groups said that a number of developments prompted a rethink of the comprehensiveness and relevance of the existing payments regulatory framework.
In addition to identifying these developments for review, the policy document also sets out a number of possible recommendations that the National Treasury and Reserve Bank could introduce going forward.
New or unregulated service providers, services, systems and instruments
One of these areas is ‘new or unregulated service providers, services, systems and instruments’ – which the policy document identifies as virtual currencies, distributed ledger technologies and fintech companies.
“The National Payment System Department (NPSD) is aware of payment systems, payment services, instruments, products, functionalities and service providers operating in the unregulated domain,” it states.
“These include closed-loop systems such as the social grants payment system, payroll deduction system, mobile money systems/providers, remittance products and operators, VCs, fintech, cloud computing, artificial intelligence, open banking, and so on.
“In certain instances, some of these systems, services, instruments, functionalities, products and service providers are mainly provided as an alternative to regulated systems, instruments, services and providers, or to circumvent the existing NPS regulatory framework in contravention of the applicable public policy objectives.”
While the policy document states that direct regulation of all payment systems, instruments, technologies, functionality, services and service providers may be practically impossible, it argues that the SARB should have the authority to intervene in the unregulated domain where necessary to promote adherence to the public policy objectives and other applicable principles.
“The SARB should be required to, on an ongoing basis, scan the regulatory perimeter to identify and respond to emerging risks,” it states.
“The NPS Act should therefore provide for this and have an enabling provision empowering the SARB to intervene through the issuing of standards, conditions, authorisation criteria or directives in respect of these services, systems or entities, and to take the necessary enforcement for non-compliance with these regulatory instruments.”
It adds that the NPS Act should also have a prohibitions clause for the outright prohibition of provision of regulated services, instruments and systems without the required authorisation.
“In the future, the SARB should consider other methods of payment that could impact the efficiency and stability of the NPS, especially transfers of value other than money (e.g. the transfer of airtime and bitcoin).
“These activities may bring immediate risks to the consumer as well as longer-term risk to effective monetary policy, and may require appropriate regulation,” it states.