Picture: ISTOCK
Picture: ISTOCK

SA’s payment landscape could be in for a shake-up, after the SA Reserve Bank published a consultation paper on the feasibility of setting up a domestic card scheme for the first time, which aims to open up the market long dominated by Visa and MasterCard.

The two US-based global payments technology companies accounted for 48.8-million cards that were in circulation in SA in 2019, and R5.6bn in transactions to the value of R2.1-trillion were processed in the same year, the Reserve Bank said in a statement. Compared to 2018 this was an increase of 16.2% in volume terms and 15.6% in value terms.

Apart from fostering competition and hopefully innovation, the Reserve Bank said the establishment of the domestic card could benefit the underserved communities in SA by enabling and encouraging access to a cheaper, safer and convenient payment method.

The Reserve Bank also cited the banking inquiry — which was conducted as far back as 2008 by the Competition Commission — showing that most South Africans at the time had no immediate need of a card that can be used overseas.

“This raises the question regarding the scope for developing white label or locally branded cards as cheaper alternatives to the brands of the major card schemes — especially for consumers who do not enter into global internet transactions or use cards beyond the borders of SA or beyond the SA Development Community,” SARB said in a statement.

All role players — card issuers, retailers, consumers, regulators, policymakers, government departments, government agencies, financial technology companies — have until the end of March 2021 to comment on the consultation paper.

The Reserve Bank said there were currently two main models for card schemes in SA, which are: four-party and three-party schemes.

A four-party card scheme or, also known as open card scheme, has no direct relationship with the merchant/retailer or cardholder. It enables multiple card issuers and acquirers to connect to the same card network. The card issuer has a contractual relationship with the cardholder while the acquirer contracts with the merchant.

Card acquirer is a clearing system participant and a member of a card scheme that enters into a contractual relationship with a merchant and the card issuer for the purpose of accepting and processing card transactions.

For example, Visa and MasterCard are the dominant card schemes accepted by all SA merchants that accept card payments.

The US-based American Express illustrates how the three-party card scheme works. It generally acts as both a card issuer and acquirer, operating its own network and processing transactions. But in SA, the company operates under the Nedbank licence. Nedbank is the exclusive issuer and acquirer of American Express cards within SA. American Express signs up merchants to accept its cards.


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