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South African Reserve Bank Modernises Payments by Adopting new International Standard

With the financial and payments sectors seeing strong recent growth throughout Africa, the South Africa Reserve Bank (SARB) looks to further modernise payment systems in the region via the adoption of a new international standard.

South Africa has become one of the first countries in the continent to adopt the International
Organisation for Standardisation (ISO) financial messaging standard ISO 20022. SARB expect the standard to become a foundation for all high-value payments in reserve currencies by 2025.

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is driving the move. ISO 20022 is to introduce a single message exchange mechanism for payments across the globe. The standard allows for better-quality data in payment processing and settlements. SWIFT has set a 2025 deadline by which all users in its network must have transitioned to this messaging standard.

Reasons cited for the decision to adopt the international standard include increased regulation, ever-evolving cybersecurity threats and customer demands for faster, more cost-effective payments. The plan is for ISO 20022 to improve compliance and transparency. Enhancing customer experience and speeding up payment systems harmonisation are also benefits the move could offer.

Importantly, the adoption begins a move away from the legacy proprietary messaging format Swift Message Type. ISO 20022’s Extensible Markup Language (XML) is to replace this legacy format.

XML is a language and file format which stores, transmits and reconstructs information. The file format allows for the exchange of much more detailed data. Such data includes the details of remittance, the purpose of payment, the original source and the final beneficiary alongside extra supplementary data.

Modernising payment systems in South Africa and beyond

South African Reserve Bank and ISO 20022The planned migration to ISO 20022 highlights the effort made to completely renew and modernise South Africa’s domestic payments infrastructure. South Africa‘s Real-Time Gross Settlement (RTGS) system may also see an improvement. The SAMOS (South African Multiple Option Settlement) system is owned by the South African central bank, which began the adoption of the new standard in September 2022.

SARB now plans to support this change throughout the Southern African Development Community (SADC). Comprising of 16 member states, the regional economic community has already seen systems using the
ISO 20022 message standard. The ‘Transactions Cleared on an Immediate Basis’ (TCIB) system operated by BankservAfrica was implemented in August 2021, which used the standard. 

The cross-border TCIB system is a low-value payment scheme that enables fast clearing of single credit ‘push’ transactions, settled on a deferred basis.

The scheme is open to all banks and authorised non-banks across the SADC. Integration points into other regions of Africa are also possible, including in East Africa.

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