South Africa leads in digital payments. This is reflected in the numerous fintech innovations born in the country. Among these are challenger payment providers driving instant payments and recurring payment models – and businesses are eagerly adopting them. Yet, the National Payment System has not quite kept pace with technological advancement, leaving this sector outdated and ungoverned to a degree, while entrepreneurs deal with bottlenecks and vulnerabilities. Thankfully, this is changing.
Challenger payment providers are defined as digital-first fintech companies that compete with traditional banks. In South Africa, this means they are giving the Big Five Banks a run for their money by offering faster, cheaper, and more flexible ways to send, receive, and process payments.
The problem is that the National Payment System (NPS), the network of laws, rules, technologies, and institutions that enable safe transactions in South Africa, was never set up to include payment providers.
The National Payment System Act 78 of 1998 provides the legal framework for managing, regulating, and supervising payment, clearing, and settlement systems in South Africa, and the South African Reserve Bank Act 90 of 1989 empowers the SARB to oversee these systems. Both pieces of legislation use terms like “bank”, “business of a bank” or “deposit” – language that doesn’t fit digital payment providers.
In early 2025, the SARB put forward draft legislation to amend this wording and expand its definitions. But this isn’t the quick fix it seems to be for payment providers. To ensure the inclusivity that the NPS is supposed to offer digital payment providers as well as traditional financial institutions, the Association of South African Payment Providers (ASAPP), an industry association for fintech payment providers and other participants, is enabling key role players to put forward practical proposals of their own.
These contributions will shape the future of the country’s payment system.
What is the National Payment System in South Africa and How Does it Affect Small Businesses?
Electronic payments in South Africa are widely used by consumers and businesses alike. From instant online payments via EFT in South Africa to real-time payments like PayShap and card payments, South Africans are spoilt for choice when selecting payment solutions for small businesses in South Africa.
Here are some statistics that put payment methods for small businesses in South Africa into perspective:
Roughly R167 trillion worth of transactions were completed within the payment systems in South Africa during 2025. Additionally, approximately 507 million transactions were completed via PayShap, amounting to a total value of R486 billion. Card payments at POS amounted to R1,9 trillion.
Entrepreneurs cannot avoid adopting an electronic payment system in South Africa. To thrive, businesses need reliable payment methods for small businesses in South Africa, ensuring shoppers have multiple convenient payment options while maintaining security. With this in mind, fintech payment providers have filled the gap, offering digital wallets, payment gateways, and point-of-sale systems. These institutions play a key role in building an accessible, competitive, and innovative payments ecosystem.
But businesses are also paying a toll in responding to the rise in digital payments: Interchange fees are paid between financial institutions on card transactions. Payment costs add up and affect not only the consumer but the merchant too.
ASAPP has submitted two Cost of Payments and Interchange papers to the SARB, which have been included in the Interchange Determination Project.
“ASAPP supports lower interchange on consumer card transactions, determined through a transparent and evidence-based methodology,” says Lincoln Mali, Chairman of ASAPP. “The methodology should consider the cost to merchants of accepting digital payments, the effect of interchange on merchant acceptance, and South Africa’s transition from cash to digital payments.”
Mali adds that the review should also consider the full cost of card acceptance, including scheme fees, incentives, rebates, and routing arrangements. “Any savings achieved should reach merchants and consumers.”
Because a merchant’s payment-acceptance cost includes interchange, scheme fees, acquiring and processing charges, infrastructure costs, devices, and fraud-related costs, all charges need to be investigated. “A reduction in any one component does not automatically reduce the merchant’s total cost.
“The Authorisation Framework should allow more providers to compete for merchants. As merchants become more familiar with digital payments and have a wider choice of providers, competition should continue to intensify. This competitive process should help ensure that cost efficiencies are reflected in the services and prices offered to merchants and consumers,” he explains.
Furthermore, Mali clarifies that interchange and scheme fees are centrally determined or unilaterally set, and the parties paying them have limited ability to influence them through ordinary competition. “ASAPP therefore supports greater transparency and appropriate regulatory oversight of these wholesale fees, including direct intervention where fees are disproportionate or are not constrained by competition.
“ASAPP’s view is that the full payment-cost stack should be transparent and reviewed together. Low-value PayShap transactions should be free to consumers, merchant pricing should be transparent, and reductions in wholesale costs should be reflected in the prices charged further down the payment chain.”
PayShap for Business: Expanding Merchant Acceptance
ASAPP has also developed and submitted a proposal to the SARB’s National Payment System Department on PayShap merchant acceptance and interoperability.
“We want to encourage expanding PayShap merchant acceptance, but the main barrier is the absence of a simple, widely available, and commercially viable way for merchants to accept PayShap at the point of sale,” Mali explains.
He argues that merchants should be able to accept PayShap through familiar infrastructure, including existing terminals and interoperable QR codes, without having to support separate systems for different providers. “Consistent functionality, a recognisable PayShap brand, transparent pricing, and clear rules for refunds, reversals, disputes, and settlement will also be needed.
“For low-value payments, the cost must make sense when compared with cash.”
What is the Role of SARB in the National Payment System and Authorisation?
Under the draft Authorisation Framework, fintech payment providers will be able to apply directly to the SARB for approval to:
- issue e-money and payment instruments;
- acquire payment instructions;
- initiate payments;
- provide third-party payment services;
- provide domestic money-remittance services;
- operate payment schemes;
- clear payment instructions; and
- participate in settlement arrangements where the applicable requirements are met.
“A fintech payment provider will therefore be able to provide an authorised payment service directly without requiring a bank sponsor merely to conduct that activity.
Where clearing and settlement are required, the provider may appoint a sponsoring participant or apply for direct participation. Direct clearing and settlement will therefore depend on the provider meeting the relevant designation, membership, capital, technical, operational, and risk-management requirements,” Mali continues.
Large banks are likely to have fewer sponsorship arrangements as qualifying fintech payment providers move to direct participation, although sponsorship will remain relevant for providers that choose, or need, to use it.
“A broader range of providers contributing to digitisation can also expand the overall digital-payments market. This can bring more consumers and merchants into digital payments, increase transaction volumes, and create opportunities for fintech payment providers and incumbent institutions. Growth in digital payments can therefore benefit the wider ecosystem,” he says. This is important because one of ASAPP’s goals is to encourage wider adoption of digital payments in South Africa.
What Do Legislative Changes Mean for Payment Gateways, BNPL Providers, and Cross-Border Payment Solutions?
In short, the effect will depend on the activities performed under each business model.
“A payment gateway providing only technical connectivity may not require authorisation under the framework. A gateway that also acquires payment instructions, initiates payments, issues e-money, provides third-party payment services, or performs another listed payment activity will need the relevant SARB approval,” he notes.
“For BNPL providers, the credit component will continue to be governed by the applicable credit and consumer-protection requirements. Any payment activity performed as part of the service must be assessed separately under the payment regulatory framework.”
Mali explains that direct authorisation may reduce sponsorship costs, operational dependence, intermediation, and counterparty risk. “The extent of the benefit will depend on the provider’s model, the payment activity performed, and whether it uses a sponsor or applies for direct clearing and settlement participation.”
Authorisation Framework and Banks Act Exemption Notice only apply to domestic payment activities. “Cross-border providers remain subject to the applicable exchange control, FinSurv, NPSD, anti-money laundering, sanctions, and other cross-border payment requirements,” he states.
Anti-Fraud and Cybersecurity in Digital Payment Systems
The digital payment industry must balance increased interoperability with the necessary security and fraud-prevention measures.
“ASAPP supports interoperability and security being developed together. Common technical and security standards, confirmation of payee, secure digital identity, fraud-intelligence sharing, and clear liability rules can improve security across the payment system,” Mali elaborates.
“Interoperability should make it easier for participants to exchange relevant information and coordinate their response to fraud. When information moves efficiently across the ecosystem, suspicious patterns can be identified earlier, participants can act more quickly, and lessons from incidents can be shared more widely.
ASAPP also supports risk-based controls that allow additional verification, transaction holds, or limits where data indicates a higher risk, while allowing lower-risk payments to remain quick and simple. “Banks and appropriately regulated fintech payment providers should be able to contribute to and act on relevant fraud intelligence. This must take place within appropriate privacy, legal, security, and governance requirements. Shared services must also have appropriate resilience, recovery, and fallback arrangements.”
As part of its strategic positions, ASAPP advocates for shared fraud intelligence, confirmation of payee, secure and reusable digital identity, clear liability rules, and consistent customer-protection standards.
ASAPP also supports banks and appropriately regulated fintech payment providers having equitable access to relevant fraud intelligence and prevention capabilities. Merchants should receive timely warnings and practical support when fraud patterns emerge.
“Participants should maintain appropriate cyber and operational resilience, including controls addressing third-party providers, shared infrastructure, cloud services, concentration risk, incident response, recovery, and service continuity,” he highlights.
“Fraud frequently crosses institutional and payment-channel boundaries. Effective prevention requires coordinated action by banks, fintech payment providers, regulators, telecommunications providers, law-enforcement bodies, and other relevant participants,” Mali concludes.
