Beyond Bank Sponsorship - A New Regulatory Path For South African Fintech

South Africa’s payments landscape may be on the verge of a meaningful shift. The South African Reserve Bank’s (“SARB”) proposed exemption and draft Authorisation Framework (“draft Directive”) point toward a model in which certain payment activities conducted in the national payment system (“NPS”) would no longer automatically be treated as “the business of a bank” under the Banks Act 94 of 1990 (“Banks Act”), provided they take place within a dedicated regulatory, supervisory and oversight framework. For fintech businesses, this is significant. It suggests a future in which access to key payment activities may depend less on bank sponsorship by default and more on activity-based authorisation and compliance.

The policy logic is clear. The impact assessment says the current framework has restricted non-bank participation in payments, limited competition and slowed innovation, even as technology has enabled new market participants to enter the ecosystem. It also identifies financial inclusion, competition, interoperability and consumer protection as core drivers for reform. In particular, the documents note that non-banks have historically been prevented from conducting certain payment activities involving pooled funds unless they partnered with a bank, and that exemptions for activities such as e-money issuance, money remittances and payment initiation could help address that position.

For South African fintech, the immediate attraction is obvious. If implemented in materially similar form, the framework could create a more direct route for non-banks to provide payment services such as e-money, acquiring, payment initiation, third-party payment services and money remittance. The draft Directive expressly says it aims to promote competition, innovation and financial inclusion in the NPS, and that both banks and non-banks may offer listed payment activities if they meet the relevant authorisation or registration requirements. It also says that non-bank payment activities listed in the exemption notice would be exempt from the definition of “the business of a bank.”

That said, this is not deregulation. It is a shift in regulatory framework. The opportunity for fintech is paired with a meaningful compliance burden. The impact assessment makes that plain. It envisages a framework in which non-bank payment institutions would be subject to authorisation, capital requirements, safeguarding and segregation of client funds, governance and risk-management controls, operational and technology requirements, ongoing supervision, reporting and AML/CFT/CPF obligations. The draft Directive reflects that approach in detail. For example, Tier 1 e-money issuers would need to hold minimum capital of ZAR8 million, Tier 2 e-money issuers ZAR5 million, payment initiation providers ZAR2 million, acquirers ZAR3 million, Tier 1 third-party payment providers ZAR2 million and Tier 1 money remitters ZAR2 million.

That combination of access and obligation is where the implications become most interesting. For established fintechs with funding, governance maturity and compliance capability, the framework could be enabling. It may allow stronger control over product design, customer experience and economics, without the same degree of dependence on bank partners for every relevant activity. The impact assessment expressly notes that non-banks would no longer always need to partner with competitor banks to provide e-money and money remittance services, and that this could improve business models and expand creative payment options.

For smaller or earlier-stage fintechs, however, the picture is more mixed. The same impact assessment acknowledges that compliance costs may be material. Those costs include legal and administrative preparation, AML/CFT/CPF systems, capital funding, infrastructure investment, audit and assurance requirements, and qualified personnel. In other words, the framework may widen the door to entry, but it will not make entry costless. It may therefore favour serious, well-prepared operators rather than lightly capitalised experiments.

The framework also appears to favour a more structured domestic payments ecosystem. The draft Directive is expressly applicable to domestic payment activities, while cross-border payment activities are excluded from its scope. That is an important limitation. For South African fintechs focused on local wallets, local payment initiation, merchant acquiring, domestic remittances or third-party payment services, the proposals may be immediately relevant. For firms whose models depend materially on cross-border payment flows, the position is less straightforward and may still require separate regulatory navigation.

There is another important implication. The documents suggest that policy is moving toward activity-based regulation rather than entity-based assumptions. That matters for fintech because it recognises that similar payment activities may be continued by various kinds of institutions, and that regulation should be attached to the activity and its risk profile rather than only to whether the provider is a bank. That is a more modern and potentially more competitive approach. It may also create a more level playing field, which the impact assessment identifies as one of the intended benefits of the framework.

At the same time, banks are not being written out of the picture. Sponsorship remains part of the framework, and in some cases may still be commercially or operationally preferable. The draft Directive expressly provides for sponsorship arrangements in relation to closed-loop systems, clearing, settlement, acquiring and third-party payment providers. So, the likely future is not one in which banks disappear from payment innovation. It is one in which fintechs may have more options about whether to partner, sponsor, or seek direct authorisation depending on their size, strategy and product mix.

The broader implication for South African fintech is therefore not simply more freedom. It is a more serious invitation into the regulated core of the payments system. That is promising, but it also raises the bar. The winners are likely to be businesses that can combine innovation with regulatory readiness, operational resilience and trust.

Stakeholders should also note that the Prudential Authority has published Prudential Communication 10 of 2026, confirming its intention to issue the proposed Exemption Notice and endorsing the SARB’s revised draft Authorisation Framework. Comments on both are due by 15 June 2026. That makes the current consultation window an important opportunity for fintech businesses and other payment market participants to engage with a framework that could materially shape future access, competition and compliance in the national payment system.

If implemented well, this framework could become one of the more important regulatory developments for South African fintech in recent years. It has the potential to widen participation, deepen inclusion and make room for more diverse payment models. But it also signals that the path to scale in payments will increasingly run through supervision, governance and compliance, not around them.

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