The South African National Payment System in context Walter Volker - - PowerPoint PPT Presentation

The South African National Payment System in context

Walter Volker CEO Payments Association of South Africa (PASA)

Investment Symposium Wits Business School 24 October 2017

Agenda

Section 1 The National Payment System and its role players Section 2 Payment system size and trends Section 3 Payments and the economy Section 4 Forces changing payments Section 5 Opportunity or disruption? Section 6 Q & A

2

Section 1 The National Payment System and its role players

What is the NPS?

4

Formal NPS

• Consisting of open, interoperable

payment systems which are cleared through regulated clearing participants and settled in central bank money

• About 19 payment systems
• Total settlement value of over

R118.1 trillion per annum

Informal NPS

• Consisting of numerous “closed

loop”, proprietary payment systems

ALL payment systems in South Africa

5 Members 33 PSOs, [VALUE] SOs, 95 TPPPs 195

Banks PSO's SO's TPPP's

Mission To manage and develop the NPS and facilitate integration with international payments

PASA Mandate PASA (established in 1996 and formally recognised in 1999) fulfils a delegated regulatory role…

The South African Reserve Bank derives its mandate and power to establish, conduct, monitor, regulate and supervise payment, clearing or settlement systems from section 10(1)(c) the South African Reserve Bank, 1989 (Act 90 of 1989) (SARB Act).

• Maintain

safe and efficient NPS “infrastructure”

• Stimulate,

encourage & facilitate the development of new infrastructure”

• Protect a critical ‘common’ public asset
• Currently only the banks and designated clearing system

participants are members of PASA. PSO’s and SO’s are authorised by PASA and TPPP’s are registered with PASA

PASA and the South African Payments landscape

Customers SO PSO

Retail

Corporate

Third Party Payment Providers (TPPPs) Banks and non-Banks Payment Service Providers Banks or non-Banks Clearing Participants Banks or Designated Clearing Participants Settlement Participants RTGS (SAMOS) SO

Payment Service Providers Payment Enablers/ Infrastructure Providers

SO

Intensity of regulation increases from outer to inner core

The “Onion Ring”

Stakeholders in the NPS

Section 2 Payment system size and trends

8

SA Payments Landscape - Wholesale vs Retail

Monthly settlement values through SAMOS

R 0 R 2 R 4 R 6 R 8 R 10 R 12 R 14 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17

Trillions

Settlement values - 10 year history

RTL Batches Total

9

SA Payments Landscape - Wholesale vs Retail

Annual settlement values through SAMOS

R66.35 R59.52 R55.20 R58.70 R65.22 R67.96 R81.19 R94.01 R105.43 R106.87 R0 R20 R40 R60 R80 R100 R120 R140 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17

Trillions

As at September each year

RTL Batches

[CATEGORY NAME] 9% [CATEGORY NAME] 91% Retail High Value

10

SA Payments Landscape 2017

R118.1 Trillion settled through RTGS annually

The NPS

Retail Volumes Retail Value

RTC 0.4% EFT Credit 14.5% EFT Debit 11.5% AEDO 0.4% NAEDO 4.3% ATM 12.5% Cheque 0.2% Card 56.2% RTC 2.4% EFT Debit 7.0% AEDO 1.3% EFT Credit 79.0% NAEDO 0.1% ATM 1.1% Cheque 1.7% Card 7.3%

Annual Retail Volumes Annual Retail Values 95% Settled during Day 5% Settled during Night window

11

SA Payments Landscape

Growth in payments streams – 2010 to 2016

EFT Credits RTC

407m 516m R8.5 Trillion R4.8 Trillion

Volume Value

3m 15m R255.2bn R38.9bn 42m 7m R139.2bn R938.6bn

Cheques EFT Debits NAEDO

329m 410m R752.9bn R565.9bn

Volume Value

102m 153m R118.9bn R52.4bn

AEDO

8m 13m R15.6bn R6.3bn

Cards

763m 2bn R784bn R305bn

ATMs

302m 446m R181.9bn R91.2bn CAGR 4.1% CAGR 30.9% CAGR

• 22.2%

CAGR 14.8% CAGR 3.2% CAGR 5.9% CAGR 7.6% CAGR 5.8%

Section 3 Payments and the economy

The NPS as an enabler of economic activity

13

FIRMS ( SUPPLY GOOD & SERVICES) HOUSEHOLDS - CONSUMERS GOVERNMENT GLOBAL MARKETS

The NPS as an enabler of economic activity cont.

14

Properly functioning payment systems serve to “oil the wheels” of the economy:

• Enhance stability of the financial system,
• Reduce transaction costs in the economy,
• Promote efficient use of financial resources,
• Improve financial market liquidity and the

velocity of money, and

• Facilitate the conduct of monetary policy.

Section 4 Forces changing payments

Forces changing payments

16

Digitisation

Commoditisation Fragmentation

Change in Regulation Competition

Digitisation

Growing number of form factors

17

Digitisation cont.

18

• Proliferation of new devices and channel options
• Growing number of digital payment solutions

Competition

19

2008 < 10 SOs and TPPPs < 23 Members 2013 100 SOs & TPPPs 25 Members 2017 33 Members 95 SOs 195 TPPPs

• New entrants
• Growing non-bank participants
• Fragmentation of the value chain

Regulation

Increased regulation

20

FSR Bill

Cybercrimes/security Bill

POPIA FATF Directive COFI Bill AC Directive NPS Act CMA Directive

• Bill passed by National

Assembly on 22 June 2017.

• Awaiting signature by the

President before becoming an Act.

• Bill was published on 3

July 2017 for comment.

• Comment

is being collated by PASA for submission

• n

10 August.

• Information

Regulator has published its 5 year strategic plan.

• Priorities

are Regulations, Codes, stakeholder engagement, analysis

• f

legislation impacting

• n

its

• perating environment.
• FIC Ammendment Act 1
• f 2017 - Risk based

approach

• Main focus – Compliance

Recommendation 16

• FICA focus – customer

due diligence

• Managing i.t.o. FIC Act
• PASA EXO is part of a

workgroup established by NT considering conduct issues.

• Bill is expected in quarter

4 of 2017.

• Directive was published
• n 23 June 2017.
• ‘Implementation

plan’ discussed in the Directive is that as agreed with the SARB on 2016

• Two members of PASA

EXO are part of an Expert Group reviewing the NPS Act.

• A draft policy document

is being considered at present.

• Published on 30 May

2017.

• All cross border low

value EFT credits to be passed through SADC RCSO by 1 July 2018

Regulation

More inclusive regulatory framework

21

• Banks
• Designated non-banks
• PCH System Operators
• System Operators
• Third Party Payment Providers
• User Associations
• Consumer Representative bodies

Tiered membership Appropriate level of Regulation vs Risk

Fintech Open Banking Payment Service Providers

Section 5 Opportunity or disruption?

Conclusions

23

Unlikely to have fundamental disruption of the basic card or electronic “rails” in the short to medium term

2

Innovation concentrated around devices & channel options, customer interface, authentication

3

Sometimes under-served pockets of inefficiency are exploited and enhanced e.g. PayPal

5

Blockchain/ Distributed Ledger/ Cybercurrencies still immature and in an experimental/ hype phase

6

Formal NPS has a tremendous capacity to absorb new channels, devices and form factors, as well as new entrants in the value chain

1

Proprietary, closed loop payment solutions unlikely to succeed

4

Section 6 Q & A