For more than a decade, South African gift cards have existed largely within the consumer-protection space. Section 63 of the Consumer Protection Act 68 of 2008 ("CPA") treats a gift card as a "pre-paid certificate, card, credit, voucher or similar device" issued by a supplier that undertakes to provide goods or services up to the stored value. The CPA guarantees, among other things, a minimum three-year validity period and prohibits the early expiry of the residual balance. Crucially, however, the CPA's remit is limited: it was drafted on the assumption that the same party that issues the voucher is also the merchant that ultimately redeems it. That assumption is increasingly out of step with modern payment architectures, and the South African Reserve Bank ("theSARB") has now signalled a decisive shift.
The Regulatory fault line: "Closed loop" versus "Payment activity"
A draft directive currently under consideration introduces the concept of a "closed-loop payment system or payment activity": a payment arrangement that is not interoperable with other payment systems and in which the service provider to the payer is the same entity (or group) as the service provider to the payee. Examples cited by the SARB include mobile-money vouchers and store-of-value wallets - products that are functionally indistinguishable from many retail gift cards. Under the proposed framework, no person may operate a closed-loop system unless registered by the SARB, and registration carries ongoing prudential, operational, and risk-management obligations.
Gift cards that operate in a multi-merchant ecosystem (for example, shopping-mall cards, airline-alliance cards, or network-branded "open-loop" prepaid cards) already fit squarely within the definition of "payment instruments" and will almost certainly be swept into the broader "issuance of payment instruments" activity contemplated by the SARB. Even traditional single-merchant vouchers risk regulatory capture if the SARB concludes that the issuer is providing a "store of value" or "money-remittance" service by accepting funds in advance and facilitating later redemption.
Interaction with the Consumer Protection Act
Section 10(1) of the Financial Sector Regulation Act 9 of 2017 stipulates that the CPA does not apply to any function or transaction that is "subject to the National Payment System Act or a financial sector law, and which is regulated by the Financial Sector Conduct Authority." Once the forthcoming payment-system reforms are promulgated, gift cards that fall within a SARB-regulated payment activity will migrate out of the CPA's protective envelope.
In practice, two parallel regimes will emerge:
- Pure loyalty or single-merchant vouchers that do not constitute a "payment activity" (because the issuer remains the only accepting merchant and no transfer of funds occurs) will continue to be governed by section 63 of the CPA.
- Gift cards functioning as a payment instrument or store of value - particularly those that allow redemption across multiple merchants, top-ups, peer-to-peer transfers, or cash-out - will trigger SARB registration, transaction caps (currently envisaged at ZAR5 000 per day / ZAR50 000 per month), and stringent segregation of client funds.
Implications for issuers and merchants
- Licensing and prudential compliance: Issuers of regulated gift cards will have to apply for authorisation as a "payment institution," maintain ring-fenced trust or settlement accounts, and submit to SARB supervision.
- FICA obligations: Draft PCC 118A designates money-or-value transfer service providers, including issuers of payment instruments, as "accountable institutions," triggering full customer due-diligence, transaction-monitoring, and reporting duties.
- Business-model redesign: The ability to earn float interest, offer cash-out functionality, or allow multiple reloads may be curtailed unless issuers obtain additional permissions or restructure products to remain strictly within the CPA's gift-card exemption.
The Road Ahead
The SARB's Vision 2025 expressly targets fragmentation caused by closed-loop payment products. While not every voucher will require SARB authorisation, the regulatory perimeter is tightening. Stakeholders should therefore map each gift-card programme against the SARB's defined payment activities, assess whether funds are ever transferable beyond a single merchant, and begin designing compliance frameworks that accommodate SARB registration, Financial Intelligence Centre onboarding, and operational-resilience standards.
A significant segment of the South African gift-card market is poised to fall under direct SARB regulation. Issuers who wish to maintain the simplicity of a traditional gift certificate must keep their products genuinely single-merchant and non-transferable; those who aspire to broader functionality must prepare for life as a regulated payment institution.
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