On 1 March 2021, the National Payment System Department of the South African Reserve Bank (SARB) issued a consultation paper on the feasibility of establishing a domestic card scheme in South Africa (consultation paper).
The purpose of the consultation paper is to obtain opinions, views and suggestions on the feasibility of establishing a domestic card scheme and to request stakeholders to complete a questionnaire embedded in the consultation paper.
The consultation paper recognises that various jurisdictions have established domestic card schemes to better serve their communities and manage risks in their payment systems.
The SARB notes in the consultation paper that domestic card schemes could be leveraged to better serve the unbanked market and increase competition within the payments landscape.
The consultation paper references the 2008 Banking Enquiry Report to the Competition Commissioner in which the enquiry panel concerned noted 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 consultation paper on the processing of payments in South Africa, published by the SARB in November 2018, addressed concerns relating to the offshore processing of domestic transactions by card schemes. The recommendations then included the establishment of a domestic scheme or white label card.
The SARB notes that in order to adequately protect domestic issuing capabilities, it is crucial to holistically address the significance and contribution of card schemes to the national payment system's objectives and strategies.
Accordingly, the SARB is facilitating the assessment of the feasibility of establishing a domestic card scheme. The SARB notes that the success of a sustainable domestic card scheme would depend on the collective effort and support of card issuers, card acquirers, retailers, consumers, regulators, policymakers, government departments, government agencies, financial technology companies and other interested parties.
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