Sarb: White-Label ATM Rollout Targets 2028 for ZA Cash Utility

• The South African Reserve Bank plans to establish a new cash management company by March next year to oversee currency circulation.
• This new entity will facilitate the rollout of unbranded, shared ATMs, with deployment scheduled to commence in 2028.
• Sarb is in discussions with commercial banks to convert their existing branded ATMs into these neutral machines, which will offer free services.
• The initiative aims to reduce the high costs of managing physical cash, which currently burdens consumers by nearly R90 billion annually.
• Sarb also seeks to significantly boost digital payment adoption through its PayShap platform, targeting 500 million transactions per month by 2029.

This comprehensive overhaul represents the most significant transformation in how physical currency circulates within the nation in over four decades, since the initial introduction of automated teller machines.

The South African Reserve Bank (Sarb) is embarking on a significant transformation of the nation's cash management and payments landscape, with plans to establish a dedicated cash management company by next year. This new entity, referred to as a 'cash utility,' is central to Sarb's strategy to introduce unbranded ATMs across the country and enhance the oversight of currency circulation. The overarching goal is to make access to physical cash both more affordable and more convenient for all citizens.

Pradeep Maharaj, executive director of the Sarb Payments Ecosystem Modernisation Programme, indicated that the establishment of this cash utility is targeted for completion by March of next year. This foundational phase will involve defining the governance structure for the new company and appointing its board of directors. The initiative signals a comprehensive cash system overhaul South Africa has not seen in decades, aiming to modernize how physical money is handled and distributed.

Further plans include integrating existing cash centers, currently operated by both Sarb and various industry players, into this new utility. This transition process is slated to commence next year. Entities whose assets are absorbed into the cash utility will receive either financial compensation or equity shares in the new company, ensuring a structured transfer of resources. This move is expected to streamline operations, as the current network of approximately 109 cash storage, processing, and distribution centers is deemed excessive, with an optimal number estimated between 40 and 50.

A key component of Sarb's reform agenda is the introduction of unbranded ATMs South Africa-wide, commonly known as white-label ATMs. The central bank aims to finalize the deployment strategy for these machines next year, with the actual Sarb white-label ATM rollout 2028. These unbranded ATMs are designed to be shared infrastructure, allowing customers from different banks to use the same machine, thereby expanding access and potentially reducing costs.

Discussions are actively underway with commercial lenders regarding the conversion of their existing branded ATMs into these shared, neutral-branded units. A crucial meeting is scheduled for next month to finalize these proposals. The new ATMs will be mandated to provide essential services, including bank inquiry capabilities, cash withdrawals, and deposits, with certain services expected to be offered free of charge to consumers.

South Africa currently has around 30,000 ATMs, but many are inaccessible to low-income and rural communities. These underserved populations often incur transaction costs up to five times higher than their urban counterparts, exacerbating financial exclusion. The reforms are intended to address these disparities and optimize ATM placement and operational models, marking the largest revamp in cash circulation since ATMs were first introduced over 40 years ago.

Despite the push for modernization, cash remains a vital element of South Africa’s payment ecosystem, with approximately R180 billion in physical money circulating. Cash transactions account for about 56% of all consumer transactions by volume, even as digital payments continue to grow. However, the management, transportation, and security of physical currency impose a substantial cost, estimated at nearly R90 billion annually, a burden ultimately borne by consumers.

Alongside the cash system overhaul, Sarb is also aggressively pursuing PayShap digital payments expansion to align South Africa with other emerging markets. The central bank aims to increase digital payment usage from the current average of one transaction per capita per month to 15. This target is ambitious but seeks to bring the country closer to nations like Brazil, India, and Thailand, which record 25 to 26 fast payments per capita monthly.

To achieve this, Sarb plans to significantly boost the adoption of PayShap, a digital payments platform co-owned with commercial lenders. PayShap facilitates real-time transfers, offers a uniform user experience, and grants access to non-bank entities. The objective is to escalate the number of transactions processed through the system from 60 million to 500 million per month by 2029, underscoring Sarb's commitment to both an efficient cash utility establishment Sarb and a robust digital payment infrastructure.

Financial institutions and their legal counsel should monitor the establishment of Sarb's cash utility and the terms for converting branded ATMs, as this will necessitate compliance with new governance structures, potential asset transfer agreements, and revised operational frameworks for cash management and ATM services in South Africa. This also signals a push towards digital payments, which may impact existing contracts and require new compliance strategies for payment service providers.

Source: Original reporting via financial news outlet.