At the beginning of March, the South African Reserve Bank (SARB) published a consultation paper titled ‘Consultation paper on the feasibility of establishing a domestic card scheme in South Africa’.
The purpose of the consultation paper was to obtain opinions, views and suggestions on the feasibility of establishing a domestic card scheme and to request stakeholders to complete an attached questionnaire. A card scheme plays a critical role in the card payment ecosystem. It enables banks and designated clearing system participants (as card issuers) to issue cards to cardholders (consumers and business) to effect payment, withdraw cash and transfer funds. Currently, South Africa does not have a domestic card scheme.
Visa, MasterCard, Diners Club and American Express are international card schemes that operate in South Africa.
The paper referenced the 2008 Banking Enquiry Report to the Competition Commissioner in which the enquiry panel observed that: ‘most South Africans have 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 South Africa or beyond the Southern African Development Community (SADC). Expansion of such cards on a national basis has intuitive appeal, especially given the successful national white label schemes developed in the past in countries such as Norway.
The paper also referred to the ‘Consultation paper on the processing of payments in South Africa’, published by the SARB in November 2018. It addressed concerns related to the offshore processing of domestic transactions by card schemes and included recommendations like the establishment of a domestic scheme or white label card.
While the focus of the 2021 consultation paper was to see the feasibility of establishing a domestic card scheme in South Africa, the broader objective was to enhance the safety and efficiency of the NPS and to achieve the goals of the National Payment System Framework and Strategy – Vision 2025 relating to financial stability and safety, competition, interoperability, financial inclusion and cost-effectiveness.
The establishment of a domestic card scheme would benefit underserved communities in South Africa by enabling and encouraging access to a cheaper, safer and convenient payment method (i.e. a card as a payment instrument). It may also encourage competition and innovation that caters to the specific needs of the South African consumer. In addition, it would contribute to the promotion of the safety, efficiency and integrity of the payment system.