Does Your Payment Business Need PASA Registration in South Africa?

If your business collects money for clients, pays funds out to multiple people, processes payment instructions, facilitates merchant payments or sits within a payment flow on behalf of others, there is an important legal and regulatory question to ask early:

Does your business need PASA registration or authorisation?

Many businesses in the payments space describe themselves as fintechs, aggregators, collection platforms, payment facilitators or technology providers. Those labels may make commercial sense, but they do not necessarily determine the legal or regulatory position. What matters is what the business actually does in practice.

Existing PASA participation requirements, sponsorship structures and broader regulatory authorisation considerations may apply depending on whether a business acts as a third-party payment provider (TPPP), system operator or other payment participant within the National Payment System (NPS).

Importantly, PASA participation considerations should not be assessed in isolation. Depending on the business model, payment flow, operational structure and services being performed, a business may also need to consider broader National Payment System, Financial Intelligence Centre Act (FICA), AML/CFT, exchange control, safeguarding, operational resilience and broader regulatory compliance obligations.

Why this matters

This is not merely a technical compliance issue.

If a payment business is structured incorrectly from the outset, it can create significant issues later with banks, sponsor institutions, commercial agreements, due diligence processes, operational scalability, compliance obligations and broader regulatory engagement. In many cases, the issue is not that the product itself is problematic. The issue is that the legal and regulatory classification of the business model was never properly assessed.

Importantly, businesses should also distinguish between safeguarding client funds within a payment activity structure and activities that may constitute deposit-taking under the Banks Act.

That is why it is important to understand, at a practical level, when PASA participation requirements, sponsorship arrangements, system operator authorisation considerations or broader regulatory obligations may become relevant.

It is also important because the South African Reserve Bank’s (SARB) proposed payments reforms indicate a move toward a more formalised, activity-based and interoperable regulatory framework for payment activities within the National Payment System. The SARB has already published a draft Authorisation Framework and draft Exemption Notice for industry consultation, while recent PEM updates indicate that the finalised activity-based regulatory framework and exemption notice are expected to be published later this year.

When a business may need to register as a TPPP

PASA’s current participation framework generally requires a business to register as a third-party payment provider (TPPP) through a sponsoring bank where the business accepts payments from multiple parties for a client and/or disburses payments to multiple parties for a client.

In practical terms, if a business facilitates, administers, controls or operates within a payment flow on behalf of another person or entity, there may be a TPPP-related legal and regulatory question that requires assessment.

This can be relevant for businesses that:

• collect payments on behalf of clients,

• make payouts to multiple beneficiaries,

• manage payment flows between different parties,

• facilitate collections or disbursements within a payment flow

• support merchant settlement or payment facilitation models,

• or sit between customers, merchants and service providers as part of a payment activity structure

The key point is this: even if a business sees itself primarily as a software, platform or technology provider, the operational reality of how funds move through the structure may still raise legal and regulatory questions.

Businesses should also carefully assess whether they are receiving, controlling, safeguarding, pooling, administering or facilitating the transfer of client funds within a payment activity structure.

When a business may need system operator authorisation

Existing National Payment System participation requirements contemplate system operator authorisation where a business processes payment instructions for two or more persons as part of a payment instruction process.

Current participation thresholds contemplate compulsory authorisation once the business processes more than 10,000 payment transactions per month or a combined monthly value exceeding R10 million.

That means the issue is not only whether funds move through the business. It is also whether the business performs part of the payment instruction process for multiple persons or participants within the National Payment System environment.

Importantly, participation frameworks also distinguish between businesses collecting money due to themselves and businesses processing payment instructions or facilitating payment activities as a service for others.

The proposed SARB framework further indicates that payment activities will increasingly be assessed using an activity-based regulatory approach, meaning the legal and regulatory position depends less on how a business markets itself and more on the actual payment activities, operational functions, fund flows, customer relationships, settlement structures and participation arrangements involved.

Why businesses often get this wrong

The confusion usually arises because businesses assess themselves too broadly or focus too heavily on commercial labels rather than operational reality.

A founder may say:

• “We are just a platform.”

• “We only provide technology.”

• “We do not hold funds for long.”

• “We only help clients collect payments.”

• “We are not a bank.”

But those statements do not necessarily determine the legal or regulatory position.

The more important questions are:

• Who is the business collecting for?

• Who is the business paying?

• Are payment instructions being processed for more than one client or participant?

• Is the business facilitating, administering or operating within a payment flow for others?

• Are transaction volumes high enough to trigger compulsory participation or authorisation considerations?

• Who legally receives, controls, administers, safeguards or has access to client funds?

• Does the operational reality of the payment flow align with the contractual structure and customer-facing terms?

• Does the model rely on sponsorship, settlement or participation arrangements with regulated entities?

• Does the business perform operational functions that may fall within broader National Payment System participation requirements?

These are the types of questions that help determine whether PASA participation requirements, sponsorship arrangements, system operator authorisation considerations or broader regulatory obligations need to be assessed more closely.

Can PASA and FIC issues overlap?

Sometimes they can.

The Financial Intelligence Centre Act (FICA) indicates that a person carrying on the business of a money or value transfer provider falls within item 19 of Schedule 1 and is required to register with the Financial Intelligence Centre. Whether a specific payment business falls within that category depends on the actual payment activity, business model, fund flows and services being performed.

This does not mean every payment facilitator, TPPP, system operator or fintech automatically has the same FIC position. It does mean that some businesses may need to assess multiple regulatory frameworks at the same time.

Depending on the structure and payment activity involved, businesses may also need to consider AML/CFT obligations, RMCP requirements, safeguarding and segregation of client funds, outsourcing arrangements, governance frameworks, operational resilience requirements and broader National Payment System participation, settlement and regulatory considerations.

As South Africa’s payments ecosystem becomes increasingly interconnected and activity-based, the legal classification of a payment model may also affect how a business is assessed from both a National Payment System and AML/CFT regulatory perspective.

That is another reason why properly assessing the legal and regulatory classification of a payment model at an early stage is so important.

The practical questions to ask

If your business operates in payments, these are useful starting questions:

• Are we receiving payments for or on behalf of another person or entity?

• Are we making payouts or facilitating disbursements on behalf of another person or entity?

• Are we processing payment instructions for more than one client or participant?

• Do our transaction volumes or values trigger existing participation or system operator threshold considerations?

• Does our business model also raise FIC registration or AML/CFT compliance considerations?

• Do our contracts, customer terms and operating documents accurately reflect how the payment flow actually functions in practice?

• Who legally receives, controls, administers, safeguards or has access to client funds?

• Do our outsourcing, sponsorship, settlement and operational arrangements align with the actual structure and operational reality of the business?

• Does the business rely on another regulated institution or participant for sponsorship, settlement, participation or operational support?

• Would our governance, compliance, safeguarding and operational structures withstand regulatory, sponsor bank, participant, investor or broader banking due diligence scrutiny?

These are not merely operational questions. They are legal structuring, governance and broader regulatory readiness questions.

If your business collects, processes, safeguards, administers or pays out funds on behalf of others, Mahon Attorneys can assist in assessing whether PASA participation requirements, sponsorship arrangements, system operator authorisation considerations or broader National Payment System and FICA regulatory obligations may be relevant to your business model.

Mahon Attorneys also assists businesses in reviewing whether their contractual, governance, safeguarding and operational structures appropriately support the way the payment model functions in practice and align with broader legal and regulatory expectations.

FAQs

What is a TPPP in South Africa?

Under PASA’s current participation framework, a TPPP generally refers to a business that accepts payments from multiple parties for a client and/or disburses payments to multiple parties for a client through a sponsoring bank arrangement.

What is a system operator?

Existing National Payment System participation requirements generally contemplate a system operator as a business that processes payment instructions for two or more persons or participants as part of a payment instruction process.

When is system operator authorisation compulsory?

Current participation thresholds contemplate compulsory system operator authorisation once the business processes more than 10,000 payment transactions per month or a combined monthly value exceeding R10 million.

Do I need a sponsoring bank for TPPP registration?

Under PASA’s current participation framework, TPPP registration generally takes place through a sponsoring bank arrangement.

Depending on the payment activity and business structure involved, sponsorship arrangements may also form part of broader National Payment System participation, settlement, interoperability and operational requirements.

Can PASA and FIC issues overlap?

Yes, they can in certain circumstances. FICA indicates that persons carrying on the business of a money or value transfer provider fall within item 19 of Schedule 1 and may be required to register with the Financial Intelligence Centre. Whether this applies depends on the actual payment activity, fund flows and services being performed.

Businesses should also carefully assess whether their payment models raise broader governance, AML/CFT, safeguarding, outsourcing, participation, settlement or National Payment System regulatory considerations.