The South African National Payment

System – Observations and Trends

Dave C Mitchell

South African Reserve Bank

World Bank Conference

Cape Town, South Africa

April 2009

Payment System Networks

CLS Network

Settlement Network

Clearing Network

Payment Network

Payment NetworkCustomer Network

Customer Network

Customer Network

CLS

Services

Central

BankCentral

Bank

SARB

PCH

Card

CLC

PCH

STRATE

Retailer

PCH

EFTs

ATM

Broker

Bankserv

BANK

Post Bank

Clearing Bank

Settlement Bank

Customer Network

Non-Clearing Bank

SAMOS FRONT-END FACILITIES

BANK

PositionMonitor

InternalProcessingSystem

SARBLLINK

SWIFTTerminal

SARB; LINK Interface

SAMEX

Reserve Bank

SAMOS

PARTICIPATING

CENTRALDEPOSITORY

FIR

SWIFT Interface

FinancialInstrumentRegister

LoanAccount

SettlementAccount

DynamicCollateralManagement

CD

SWIFT

Facilities available to the banks

Legal Foundation

South African Reserve Bank Act

National Payment System Act (including Directives)

Payment Association of South Africa (PASA) Constitution

Payment Clearing House (PCH) Agreements

Payment Clearing House (PCH) Rules

The S. A. Reserve Bank and the Payments Association of South Africa (PASA)

SA Reserve Bank

Bank

PASA

Bank

Bank

Bank

Bank

Bank

Bank

Exec Office

Bank

NPSD

Settlements – Wholesale payments

2000 2001 2002 2003 2004 2005 2006 2007 2008

All Streams 42,239 49,430 47,339 49,705 51,533 57,574 59,331 72,399 89,381

Real Time Line 26,642 38,175 43,764 46,251 47,724 53,242 54,320 66,562 82,920

-

10

20

30

40

50

60

70

80

90

100

Ran

d -

Tri

llio

n

Total value settled vs Real Time Linesettlements

Settlements - Retail payments

67%

19%

8%

Payment Streams 2008(excluding RTL)

+EFT CR TOT

+CLC TOT

+EFT DR TOT

+CC TOT

+ZAPS TOT

+SASWITCH TOT

+VISA TOT

+DR CR TOT

NAEDO

MasterC

RTC

+AEDOTOT

+MZANSI

Settlements – Retail post Risk Reduction

-

50

100

150

200

250

300

350

400

450

Ja

n/0

0

Ap

r/0

0

Ju

l/0

0

Oct/

00

Ja

n/0

1

Ap

r/0

1

Ju

l/0

1

Oct/

01

Ja

n/0

2

Ap

r/0

2

Ju

l/0

2

Oct/

02

Ja

n/0

3

Ap

r/0

3

Ju

l/0

3

Oct/

03

Ja

n/0

4

Ap

r/0

4

Ju

l/0

4

Oct/

04

Ja

n/0

5

Ap

r/0

5

Ju

l/0

5

Oct/

05

Ja

n/0

6

Ap

r/0

6

Ju

l/0

6

Oct/

06

Ja

n/0

7

Ap

r/0

7

Ju

l/0

7

Oct/

07

Ja

n/0

8

Ap

r/0

8

Ju

l/0

8

Oct/

08

Ran

d -

Billio

ns

Electronic Fund Transfers and Cheques

Cheques EFT Credits

EFT Debits ZAPS

Overview of cards in South Africa

Total credit cards 6 110 819

Total debit cards 21 872 669

Total number of merchants 129 841

Average credit card transaction value R 510

Average signature-based card transaction value R 380

Average PIN-based debit card transaction value R 225

[2007 figures from the big four banks (excluding ATM and Garage cards)]

Real-Time Clearing (RTC)

n The RTC payment stream implemented in March

2007;

n RTC payment instructions processed immediately

and payee credited within 60 seconds;

n Interbank settlement within one hour;

n Three banks actively participating in RTC;

n Average monthly value settled in 2008 - R1,1 billion.

Oversight - Macro

Macro Level

Observe/Monitor

. Credit Risk

. Liquidity

. Legal

. Operational

. Reputational

. International Developments

. Principles

. Best Practice

NPS

SAMOS

Bank

STRATE

STRATE

Bankserv

Equity

Markets

Bond Market

Retail Payments

SARB

CD

FIR

Analyse & Evaluate

Develop

Implement

Bank

Oversight - Micro

Develop

Participant

Profiles

Discuss with

Bank Supervision

Onsite

visit

. Rating/evaluation

. Oversight report

. Recommendations

Iterative process

Feedback to

institution

. Payer profile

. Beneficiary profile

. Net effect

. Loan transaction flow

. Volume and value

. Liquidity/Collateral usage

. Risk reduction initiatives

. Operational issues

. NPS Act

. Directives and position papers

. Vision 2010

. Industry issues

NPS Governance

SANPAYAssociations

Govt.

Policy

Consult

Engage

SARB Act (Section 10)

NPS Act

PASA

PASA Constitution

PCH’s

PCH Agreements

PCH PG’s

Authorise

Low Value

CollectionsOperators

Consult

Engage

PSSF’s

Advisory

Body

NT

Banking

Association

Consult

Consult

Engage

3rd Party

Providers

History/Milestones

n 1995

– Publication of NPS Framework and Strategy

(“Blue Book”).

n March 1998

– Implementation of the SAMOS System.

n October 1998

– Promulgation of NPS Act.

History/Milestones

n 1999/2000

– Enhancement of the SAMOS System:

• Continuous Processing Line (CPL);

• DVP for financial market transactions (STRATE).

n 2001/2002

– Introduction of risk reduction measures (item limits in various payment streams – reduction of values in batch settlements);

– Formal establishment of the Oversight function.

History/Milestones

n 2003/2005

– Enhancement of the intraday monitoring

capabilities of the SAMOS System;

– Same–day square-off;

– Continuous Linked Settlement (FX).

n 2006

– Vision 2010 published.

History/Milestones

n 2007/2008

– Formal regulation of non-banks in the

NPS;

– Directives for System Operators and

Third Party Service Providers;

– Establishment of NPSAB;

– Review of the network infrastructure and

RTGS application.

Where to in the future - 1

n Commence implementation of the settlement

infrastructure and applications;

n Continue the focus on non-bank participants in the

formal oversight process;

n Increased focus on CLS operational and oversight

activities;

Where to in the future - 2

n Continue participation in regional and international

initiatives;

n Commence Framework and Strategy document for

beyond 2010; and

n Evaluation and possible implementation of the

recommendations of the Competition Enquiry.

Thank you