The South Africa Reserve Bank (SARB) has begun a process to transition into a cashless society, which does not necessarily involve a Central Bank Digital Currency (CBDC).
Speaking at the 2024 SARB Payments Conference, SARB Governor, Lesetja Kganyago, said that the central bank has initiated the Payments Ecosystem Modernization Program.
“This is the largest and most ambitious initiative by the SARB, in the payments space, since the launch of the South African Multiple Option Settlement System, or SAMOS, more than 30 years ago,” the Governor said.
“At the heart of the program is the development of a public payments utility that provides digital payments infrastructure.
Any such program must have security measures and fraud prevention at its core.”
While cash remains king in South Africa, Kganyago said digital payment systems are likely more efficient and inclusive than cash.
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He revealed that the circulation of banknotes and coins declined by 0.8 percent in 2023, marking the largest drop since 1960. This, he said, reflects the gradual adoption of the ‘evolving payments landscape,’ as people turn to more advanced payment alternatives.
“As the SARB, we are currently in an interesting situation in which we are solely responsible for producing banknotes and coin, the most popular retail payment format, but we want to innovate ourselves out of this profitable position.
And we are not insistent that we monopolise the digital payments alternative. We are just insistent that we, as a country, move with the paradigm shift and reap its benefits.”
– South Africa Reserve Bank Governor, Lesetja Kganyago
India’s Unified Payments Interface (UPI) and PIX, a Brazilian Instant Payments platform, are examples of digital systems apex bank is drawing inspiration from.
“Other countries are further ahead. Two famous examples are India’s Unified Payments Interface, or UPI, system and Brazil’s PIX. These allow instant, low-cost payments using simple tools such as a cellphone number or a QR code, instead of an expensive point-of-sale terminal.
They have quickly become ubiquitous payment technologies in these economies. And, they are inclusive: for example, you can use PIX to buy a drink from an informal vendor or to pay for a taxi ride. You even see beggars on the street asking for digital payments.”
He pointed out that these 2 countries did not need to create CBDCs to build successful payment systems:
“There has been a trend towards central bank digital currencies, or CBDCs, lately, but frankly, the most successful retail payment initiatives by central banks have involved new payment systems rather than new kinds of central bank liabilities.”
However the development of a CBDC remains under consideration, and alongside the retail payments system, is part of the country’s National Payment System Framework and Strategy: Vision 2025.
According to SARB, it is still exploring the feasibility of digitising money/cash through the issuance of retail CBDCs and use cases for a wholesale CBDC.
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— monicasinger.eth (@MonicasSinger) May 11, 2024
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