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  • The Reserve Bank on Wednesday asked for comments on whether a domestic card scheme can work in South Africa, and how it should be structured.
  • In one permutation, that would mean a direct competitor to Visa and Mastercard, with payment cards that can only be used in South Africa.
  • That could be a non-profit, or a partnership with banks, or could even involve the dominant card companies.
  • Regulators have for some time been worried about card-related fees – and taking data offshore to process a transaction between a South African buyer and a South African seller.
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The SA Reserve Bank (SARB) is asking for input on the possibility of setting up a South African equivalent to Visa and Mastercard to bypass their fees – which cover services most users don't need – and to address concerns about data going offshore.

The SARB's department responsible for the National Payment System on Wednesday started formal consultation on the feasibility of establishing a domestic card scheme in South Africa. 

Nothing, including the ownership and technical structure has been decided, the consultation framework shows. But the process comes after well over a decade of studies and recommendations about cheaper alternatives to the dominant card companies, and SA's reliance on foreign-owned financial services companies.

South African banks issue credit and debit cards under the Visa and Mastercard brands, and handle the actual flow of money when they are used locally, but the credit card companies handle communication between the banks when transactions must be authorised.

That is handy for those travelling abroad or buying online, with cards that will be accepted virtually anywhere – but the vast majority of South Africans do not need such global reach, regulators say. So maybe they shouldn't be paying for it.

A domestic equivalent could both serve communities and manage risks to the payment system, the SARB says.

"Specifically, domestic card schemes could be leveraged to better serve the unbanked market and increase competition within the payments landscape."

South Africa has no domestic card scheme. And though both Diners Club (via Standard Bank) and American Express (via Nedbank) operate locally, Visa and Mastercard handle virtually all the card transactions in SA, with a total value of trillions of rands every year.

The Reserve Bank is now asking those affected for opinions that include whether SA should have one or more domestic schemes, whether banks would be willing to issue "domestic use only" cards, and whether such a scheme should compete with – or partner with – Visa and Mastercard, including through co-branding. 

The initial consultation round runs until the end of March. 

(Compiled by Phillip de Wet)

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