The South African The South African National Payment National Payment

System System –– Observations Observations and Trendsand Trends

Dave C MitchellDave C MitchellSouth African Reserve BankSouth African Reserve Bank

World Bank ConferenceWorld Bank ConferenceCape Town, South AfricaCape Town, South Africa

April 2009 April 2009

Payment System NetworksPayment System NetworksPayment System NetworksPayment System Networks

CLS Network

Settlement Network

Clearing Network

Payment Network

Payment NetworkCustomer Network

Customer NetworkCustomer Network

CLS Services

Central Bank

Central Bank

SARB

PCH

Card

CLC

PCH

STRATE

Retailer

PCH

EFTs

ATM

Broker

Bankserv

BANK

Post Bank

Clearing Bank

Settlement Bank

Customer Network

Non-Clearing Bank

SAMOS FRONT-END FACILITIES

BANK

PositionMonitor

InternalProcessingSystem

SARBLLINK

SWIFTTerminal

SARB; LINK Interface

SAMEX

Reserve Bank

SAMOS

PARTICIPATING

CENTRALDEPOSITORY

FIR

SWIFT Interface

FinancialInstrumentRegister

LoanAccount

SettlementAccount

DynamicCollateralManagement

CD

SWIFT

Facilities available to the banksFacilities available to the banksFacilities available to the banksFacilities available to the banks

Legal Foundat ionLegal Foundat ionLegal Foundat ionLegal Foundat ion

South African Reserve Bank Act

National Payment System Act (including Directives)

Payment Association of South Africa (PASA) Constitution

Payment Clearing House (PCH) Agreements

Payment Clearing House (PCH) Rules

South African Reserve Bank Act

National Payment System Act (including Directives)

Payment Association of South Africa (PASA) Constitution

Payment Clearing House (PCH) Agreements

Payment Clearing House (PCH) Rules

The S. A. Reserve Bank and the Payments The S. A. Reserve Bank and the Payments Associat ion of South Africa (PASA)Associat ion of South Africa (PASA)The S. A. Reserve Bank and the Payments The S. A. Reserve Bank and the Payments Associat ion of South Africa (PASA)Associat ion of South Africa (PASA)

SA Reserve BankSA Reserve Bank

BankBank

PASAPASA

BankBank

BankBank

BankBank

BankBank

BankBank

BankBank

Exec OfficeExec Office

BankBank

NPSD

Settlements Settlements –– Wholesale paymentsWholesale paymentsSettlements Settlements –– Wholesale paymentsWholesale payments

2000 2001 2002 2003 2004 2005 2006 2007 2008All Streams 42,239 49,430 47,339 49,705 51,533 57,574 59,331 72,399 89,381Real Time Line 26,642 38,175 43,764 46,251 47,724 53,242 54,320 66,562 82,920

-

10

20

30

40

50

60

70

80

90

100

Ran

d -T

rillio

n

Total value settled vs Real Time Linesettlements

Settlements Settlements -- Retail paymentsRetail paymentsSettlements Settlements -- Retail paymentsRetail payments

67%

19%

8%

Payment Streams 2008(excluding RTL)

+EFT CR TOT

+CLC TOT

+EFT DR TOT

+CC TOT

+ZAPS TOT

+SASWITCH TOT

+VISA TOT

+DR CR TOT

NAEDO

MasterC

RTC

+AEDOTOT

+MZANSI

Settlements Settlements –– Retail post Risk Reduct ionRetail post Risk Reduct ionSettlements Settlements –– Retail post Risk Reduct ionRetail post Risk Reduct ion

-

50

100

150

200

250

300

350

400

450

Jan/

00

Apr/0

0

Jul/0

0

Oct

/00

Jan/

01

Apr/0

1

Jul/0

1

Oct

/01

Jan/

02

Apr/0

2

Jul/0

2

Oct

/02

Jan/

03

Apr/0

3

Jul/0

3

Oct

/03

Jan/

04

Apr/0

4

Jul/0

4

Oct

/04

Jan/

05

Apr/0

5

Jul/0

5

Oct

/05

Jan/

06

Apr/0

6

Jul/0

6

Oct

/06

Jan/

07

Apr/0

7

Jul/0

7

Oct

/07

Jan/

08

Apr/0

8

Jul/0

8

Oct

/08

Ran

d -B

illio

ns

Electronic Fund Transfers and Cheques

Cheques EFT Credits

EFT Debits ZAPS

Overview of Overview of cards in South Africacards in South AfricaOverview of Overview of cards in South Africacards in South Africa

Total credit cardsTotal credit cards 66 110 819110 819

Total debit cardsTotal debit cards 2121 872 669872 669

Total number of merchantsTotal number of merchants 129 841129 841

Average credit card transaction valueAverage credit card transaction value R 510R 510

Average signatureAverage signature--based card transaction value based card transaction value R 380R 380

Average PINAverage PIN--based debit card transaction valuebased debit card transaction value R 225R 225

[2007 figures from the big four banks (excluding ATM and Garage cards)]

RealReal--Time Clearing (RTC)Time Clearing (RTC)RealReal--Time Clearing (RTC)Time Clearing (RTC)

nn The RTC payment stream implemented in March The RTC payment stream implemented in March

2007;2007;

nn RTC payment instructions processed immediately RTC payment instructions processed immediately

and payee credited within 60 seconds;and payee credited within 60 seconds;

nn Interbank settlement within one hour;Interbank settlement within one hour;

nn Three banks actively participating in RT C;Three banks actively participating in RT C;

nn Average monthly value settled in 2008 Average monthly value settled in 2008 -- R1,1 billion. R1,1 billion.

Oversight Oversight -- MacroMacroOversight Oversight -- MacroMacro

Macro Level

Observe/Monitor. Credit Risk. Liquidity. Legal. Operational. Reputational

. International Developments

. Principles

. Best Practice

NPS

SAMOS

Bank

STRATE

STRATE

Bankserv

Equity Markets

Bond Market

Retail Payments

SARB

CD

FIR

Analyse & Evaluate

Develop

Implement

Bank

Oversight Oversight -- MicroMicroOversight Oversight -- MicroMicro

DevelopParticipantProfiles

Discuss withBank Supervision

Onsite visit

. Rating/evaluation

. Oversight report

. Recommendations

Iterative process

Feedback to institution

. Payer profile

. Beneficiary profile

. Net effect

. Loan transaction flow

. Volume and value

. Liquidity/Collateral usage

. Risk reduction initiatives

. Operational issues

. Payer profile

. Beneficiary profile

. Net effect

. Loan transaction flow

. Volume and value

. Liquidity/Collateral usage

. Risk reduction initiatives

. Operational issues

. NPS Act

. Directives and position papers

. Vision 2010

. Industry issues

. NPS Act

. Directives and position papers

. Vision 2010

. Industry issues

NPS GovernanceNPS GovernanceNPS GovernanceNPS Governance

SANPAYAssociationsGovt.

PolicyConsultEngage

SARB Act (Section 10)NPS Act

PASAPASA Constitution

PCH ’ sPCH Agreements

PCH PG ’ s

Authorise

Low Value

CollectionsOperators

ConsultEngage

PSSF ’ s

AdvisoryBody

NT

BankingAssociation

Consult

ConsultEngage

3rd Party

Providers

History/MilestonesHistory/MilestonesHistory/MilestonesHistory/Milestones

nn 19951995–– Publication of NPS Framework and Strategy Publication of NPS Framework and Strategy

(“Blue Book”).(“Blue Book”).

nn March 1998March 1998–– Implementation of the SAMOS System.Implementation of the SAMOS System.

nn October 1998October 1998–– Promulgation of NPS Act.Promulgation of NPS Act.

History/MilestonesHistory/MilestonesHistory/MilestonesHistory/Milestones

nn 1999/20001999/2000–– Enhancement of the SAMOS System:Enhancement of the SAMOS System:

•• Continuous Processing Line (CPL);Continuous Processing Line (CPL);•• DVP for financial market transactions DVP for financial market transactions

(STRATE).(STRATE).

nn 2001/20022001/2002–– Introduction of risk reduction measures (item Introduction of risk reduction measures (item

limits in various payment streams limits in various payment streams –– reduction reduction of values in batch settlements);of values in batch settlements);

–– Formal establishment of the Oversight Formal establishment of the Oversight function.function.

History/MilestonesHistory/MilestonesHistory/MilestonesHistory/Milestones

nn 2003/20052003/2005–– Enhancement of the intraday monitoring Enhancement of the intraday monitoring

capabilities of the SAMOS System;capabilities of the SAMOS System;–– SameSame––day squareday square--off;off;–– Continuous Linked Settlement (FX).Continuous Linked Settlement (FX).

nn 20062006–– Vision 2010 publishedVision 2010 published..

History/MilestonesHistory/MilestonesHistory/MilestonesHistory/Milestones

nn 2007/20082007/2008–– Formal regulation of nonFormal regulation of non --banks in the banks in the

NPS;NPS;–– Directives for System Operators and Directives for System Operators and

Third Party Service Providers;Third Party Service Providers;–– Establishment of NPSAB;Establishment of NPSAB;–– Review of the network infrastructure and Review of the network infrastructure and

RTGS application.RTGS application.

Where to in the future Where to in the future -- 11Where to in the future Where to in the future -- 11

nn Commence implementation of the settlement Commence implementation of the settlement

infrastructure and applications;infrastructure and applications;

nn Continue the focus on nonContinue the focus on non--bank participants in the bank participants in the

formal oversight process;formal oversight process;

nn Increased focus on CLS operational and oversight Increased focus on CLS operational and oversight

activities; activities;

Where to in the future Where to in the future -- 22Where to in the future Where to in the future -- 22

nn Continue participation in regional and international Continue participation in regional and international

initiatives; initiatives;

nn Commence Framework and Strategy document for Commence Framework and Strategy document for

beyond 2010; and beyond 2010; and

nn Evaluation and possible implementation of the Evaluation and possible implementation of the

recommendations of the Competition Enquiry.recommendations of the Competition Enquiry.

Thank yoThank youuThank yoThank youu