The Banks Act 94 of 1990 (the "Banks Act") provides that only a licensed bank may conduct "the business of a bank" in South Africa. The "business of a bank" is broadly defined and incudes the acceptance of "deposits" from the general public, as a regular feature of the business in question.
A "deposit", in turn, is defined as an amount of money paid by one person to another person, subject to an agreement in terms of which an equal amount or any part thereof will be conditionally or unconditionally repaid.
In simple terms, if a person takes customers' money and promises to repay it later, it may be conducting the business of a bank.
In the payments space, this prohibition can have a number of complications. For example, if a payment service provider ("PSP") accepts funds from an individual for on-payment to a third party, but agrees to repay the individual on demand, the PSP may be accepting deposits, in contravention of the Banks Act. Similarly, entities which provide digital wallets, allowing users to "cash out" their funds, may be violating the Banks Act.
In light of these difficulties, it is unsurprising that banks have long dominated South Africa's national payment system ("NPS").
This year, the South African Reserve Bank ("the SARB") took a definitive step towards opening the NPS to more players. On 3 March 2025, it issued two draft documents for public comment:
- The Draft Exemption Notice issued under the Banks Act definition of "business of a bank" ("Draft Exemption Notice"); and
- The Draft Directive on specific payment activities in the national payment system ("Draft Directive").
The Draft Exemption Notice lists several "exempted payment activities", and states that if these activities involve a) the pooling of funds from the public, b) in a "store of value" or "payment account", c) to facilitate the transfer of funds or to enable payments, such activities would be deemed not to constitute the business of a bank in terms of the Banks Act.
However, the Draft Exemption Notice is only applicable if certain stringent safeguards are met, which are set out in the Draft Directive.
In terms of the Draft Directive, any entity - bank or non-bank - that wants to conduct the exempted activities must apply for authorisation. Applicants must give the SARB detailed information regarding their governance, capital, risk controls, data protection, and how they will keep client funds safe.
Key provisions in the Draft Directive include:
- minimum capital, and liquidity requirements;
- limits on earning interest on customer funds; and
- conduct rules for agents, outsourcing, and business continuity plans.
Furthermore, although exempted entities will avoid Banks Act regulation, they will still face the SARB supervision, on-site inspections, and regular reporting requirements. The SARB may order corrective steps, vary or cancel authorisations, or withdraw the exemption entirely.
In short, even small, specialised payment businesses will need strong governance and risk management frameworks, and will be subject to rigorous regulatory oversight.
Nevertheless, if adopted in their current form, the two draft instruments will redraw the line between banking and non-bank payment services. The new framework would remove the need for a banking licence to conduct the listed activities, and would create a tailored authorisation and prudential regime in its place.
Whether a business falls inside or outside the exemption will depend on the exact services it provides. Payments companies should carefully compare their current and planned activities to the exempted categories.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
