Why South Africa wants fintechs on its payment network

This is Follow the Money, our weekly collection that unpacks the earnings, enterprise, and scaling methods of African fintechs, monetary establishments, corporations, and governments. A brand new version drops each Monday.

South African banks earn cash from fintechs that compete with them. A payment firm or fintech can construct its personal app, discover prospects, and assist companies settle for funds, however still needs to pay a bank to maneuver that cash by way of the nation’s monetary system.

The South African Reserve Bank (SARB), the nation’s central financial institution, wants to let regulated non-banks do extra of that work themselves.

On October 20, SARB governor Lesetja Kganyago said the central financial institution plans to publish a brand new authorisation framework by the top of November 2026. 

The reforms would permit accredited non-banks to difficulty digital cash, course of service provider funds, and entry clearing and settlement programs immediately, with no sponsor financial institution.

It places banks’ revenue from fintechs up for grabs. South African payment corporations might hold cash they now pay their financial institution companions or use the financial savings to chop charges and win prospects. The alternative will decide whether or not opening the system makes funds cheaper or just modifications who earns from them.

Lesaka Technologies, a South African fintech group serving customers and retailers, affords a transparent instance of what that dependence prices. 

In its September 2025 earnings call, Ali Mazanderani, Lesaka’s govt chairman, said the corporate paid banks for entry to the payment system and misplaced out on curiosity it might have earned on cash (deposits) held by way of these partnerships.

Under a sponsorship association, the fintech brings in prospects whereas a financial institution offers entry to the payment system and earns a charge for doing so.

Lesaka wants to deliver extra of that work in-house by buying Bank Zero, a South African digital financial institution. First announced in June 2025, the deal was nonetheless awaiting regulatory approvals in September 2026, with completion anticipated in December.

“The addition of Bank Zero will improve our existing value proposition, especially in our Consumer business,” Mazanderani stated. 

“In phrases of product, it ought to cut back dependencies on third events, enhance our responsiveness to shoppers, enhance availability, cut back friction, and increase the vary of consumers we will tackle. 

“In terms of cost, we currently have expenses we incur associated with bank sponsorship both in terms of direct fees and indirectly in foregone interest or float revenue, which have a negative drag on our P&L.” 

SARB’s reforms would give accredited payment corporations direct entry with out having to purchase a financial institution. They might then select whether or not to maintain paying for sponsorship or take on the price of connecting and working independently. 

Merchants would profit if that change lowers suppliers’ prices and competitors pushes them to cross the financial savings on by way of decrease charges.

Who earns from the shopper’s payment?

In the 12 months ended June 2026, Shoprite, South Africa’s largest grocery store chain by annual income and retailer rely, earned R334 million ($20.2 million) in cash switch commissions, up from R290 million ($17.5 million) the earlier 12 months. The retailer operates 2,839 shops.

It earned one other R214 million ($13 million) from dealing with funds to third-party accounts and insurers, bringing these two revenue streams to R548 million ($33 million), about 0.2% of the group’s complete income that 12 months.

It is a small however significant income for the nation’s largest retailer. But for a a lot smaller fintech with out the identical attain, that may very well be a considerable income, underscoring why corporations exterior banking need a larger position in funds. 

Shoprite’s earnings present that corporations exterior banking already generate income by serving to prospects transfer cash and pay payments.

However, its buyer accounts nonetheless rely on a financial institution: Shoprite brings its model, prospects, and retailer network (attain) to the partnership. African Bank, a South African lender, provides the banking companies behind Shoprite’s Money Market Account, which had 4.3 million customers as of June 2026. 

African Bank additionally earns from these relationships. In its 2025 outcomes, the lender stated charges and commissions from strategic partnerships helped grow its non-interest revenue, alongside elevated use of its transactional accounts and bank cards. 

The lender’s non-interest revenue grew by 39% to R2.1 billion ($126.7 million) within the 12 months ended September 2025.

SARB’s reforms would give qualifying non-banks the choice to deal with extra of the payment course of themselves. 

Approved corporations might join on to clearing and settlement programs, which trade payment directions and settle cash between establishments, with no financial institution sponsor.

The monetary alternative is to retain extra of the revenue from prospects they already serve. Lesaka has recognized charges and forgone curiosity as prices of its financial institution partnerships. 

Direct entry would permit qualifying payment corporations to switch some companies they purchase from banks, whereas taking on the expense of offering these companies themselves.

That offers them two methods to compete: hold extra money from current transactions or decrease their costs to draw extra enterprise. 

Merchants and customers profit from the financial savings when suppliers select the second choice.

Opening entry offers these corporations extra room to compete with banks and negotiate with them. 

The monetary incentive would permit non-banks to retain extra of the revenue from prospects they already serve.  

Who pays for a less expensive payment?

Customers will pay totally free whereas retailers cowl the associated fee. Ozow, a South African digital funds firm, stated it charges retailers 1.5% for its Pay by Bank and PayShap Request companies, with a R1 ($0.06) minimal per transaction. It additionally costs R3 ($0.18) per payout or refund.

Ozow doesn’t cost the shopper making the payment, however their financial institution could cost them, based on the corporate. 

Cutting Ozow’s service provider charge would depart the enterprise with extra money from every sale. Cutting the shopper’s financial institution charge would make the payment cheaper for the shopper. 

Some banks already provide free transfers. GoTyme Bank, a South African digital financial institution, stated it charges nothing for PayShap transfers of as much as R5,000 ($302), based on its web site. 

Transfers above R5,000 ($302) and as much as R50,000 ($3,016) value R7 ($0.42), whereas receiving cash is free. 

PayShap is the shared instant-payment service behind these transfers, however collaborating establishments set their very own buyer costs. The infrastructure permits cash to maneuver; the supplier decides what to cost for shifting it.

Direct entry would give qualifying non-banks extra management over the price of offering these companies. 

Competition would decide whether or not they use that management to decrease service provider costs, provide prospects extra free transactions, or retain extra revenue.

Price additionally impacts how typically folks use digital funds. On October 20, Kganyago stated PayShap processed solely about 6% as many transactions as playing cards final 12 months. 

He recognized pricing, low consciousness, inconsistent companies throughout banks, and restricted service provider acceptance as obstacles to wider use.

Payment corporations have a purpose to chop charges if doing so attracts sufficient extra enterprise. The alternative is to earn much less from every payment whereas dealing with extra of them. Competition might flip higher entry into cheaper funds for retailers and customers.

Replacing the financial institution has a worth

Direct entry additionally brings bills for fintechs and qualifying non-banks. They might take on bills their financial institution companions presently deal with. 

SARB’s May draft framework proposes R3 million ($181,000) in preliminary capital for corporations accepting payment directions for retailers, and R5 million ($301,692) or R8 million ($483,000) for digital cash issuers (EMIs), relying on their tier. 

They would additionally want programs and workers to guard buyer funds, hold companies operating, and meet reporting necessities.

These commitments would decide whether or not direct entry prices lower than financial institution sponsorship. Larger suppliers might unfold the expense throughout extra transactions; smaller payment corporations and non-banks would possibly nonetheless discover a financial institution partnership cheaper.

The reform offers payment corporations a alternative over how they function. Savings start solely when doing the work themselves prices lower than paying a financial institution.

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