Business, Fintech, News

South African Reserve Bank rolls out big payment system upgrade

Luis Monzon

4th November 2022

The South African Reserve Bank (SARB) has migrated its systems to a new financial messaging standard.
ISO 20022 is set to enable faster payments processing and offers better protection against cyberthreats.
The SARB will be guiding the adoption of ISO 20022 across participant banks in the Southern African Development Community (SADC).

The South African Reserve Bank (SARB) has announced that it started rolling out new technologies across its payment ecosystems for their further modernisation.

To this end, the SARB has adopted the International Organisation for Standardiation (ISO) financial messaging standard (ISO 20022), which will see faster cross-border payment processing among other benefits.

This will mark a move away from the legacy technology being used by the bank, known as Swift Message Type (SWIFT MT) to ISO 20022’s latest XML-based processes.

With the adoption, South Africa is now among the first countries in Africa to have the international financial messaging system standard, which is expected to be leveraged for all high-value payments in reserve currencies by 2025, according to SA News.

ISO 20022 is being driven by the Society for Worldwide Interbank Financial Telecommunication (SWIFT) and will introduce a “harmonised message exchange mechanism for payments across the globe,” which allows for “richer, better quality data in payment processing and settlements,” says the SARB.

South Africa’s central bank says that the adoption was neccesary because of the ongoing rapid development of disruptive technology, as well as “evolving cyber-threats, increased regulation and demands from customers for faster, more cost-effective payments.”

“The adoption of the ISO 20022 standard is expected to improve compliance and transparency, increase efficiency and interoperability, enhance customer experience, and speed up payment systems harmonisation,” the SARB adds.

This migration to the new messaging standard is being seen across the global payments landscape.

“Its adoption in South Africa is a pivotal marker in the country’s efforts to renew and modernise its domestic payments infrastructure,” the SARB continued.

The SARB says that it has guided the further adoption of ISO 20022 through the Southern African Development Community (SADC). The switchover for participants banks in the SADC is expected to be completed by October 2023.

Further, the Reserve Bank says that the “EFT debit system has already embedded the ISO 20022 format, with the introduction of the DebiCheck service that enables consumers to authenticate early debit orders attached to their accounts.”

The SARB’s migration to ISO 20022 makes way for faster payments through the introduction of Rapid Payments Programme (RPP), expected to launch in South Africa in 2023.

“When rolled out, the RPP will offer a cost-effective instant payment service across banks, a proxy service to embed user banking details, a request to pay service as well as support for several known retail payment use cases,” said the central bank.

SWIFT has apparently set a 2025 deadline by which all users in its network need to have transitioned to the ISO 20022 messaging standard.

Apart from these modernisation efforts, the Reserve Bank is also planning regulatory measures for cryptocurrencies in South Africa which could come into force within the next nine to 15 months.

Cryptocurrency was recently declared a financial product in the country by the Financial Sector Conduct Authority (FSCA), South Africa’s public finance watchdog.