Big EFT and debit order change from South African banks

South African banks will implement a big electronic funds transfer (EFT) payment change in September 2024, impacting direct payments and debit orders.

The change followed a decision by the Common Monetary Area (CMA) regulators to discontinue processing EFT payments and collections within the CMA.

The Common Monetary Area links South Africa, Namibia, Lesotho, and Eswatini into a monetary union.

The South African rand is legal tender across CMA despite these countries issuing their own currencies.

These currencies, the Lesotho loti, Namibian dollar and Swazi lilangeni, are pegged to the South African rand.

This arrangement had many benefits, including the ability for CMA countries to access the South African financial markets.

Another benefit was that cross-border EFT and debit order payments could be made without jumping through hoops or using systems like Swift.

Historically, low-value cross-border payments within the Common Monetary Area have been processed through South Africa’s domestic retail payment system.

However, treating cross-border payments as domestic transactions was non-compliant with international Anti-Money Laundering and Combating of Financing of Terrorism (AML/CFT) standards.

One problem was that the current system considers payments from Lesotho, Namibia, and Eswatini to originate from South Africa, regardless of their source within these countries.

This makes it difficult to track and trace the origin and sender of funds and prevent and address money laundering.

To address this challenge, the regulators in CMO countries have announced changes to cross-border payments.

Starting in September 2024, low-value cross-payments will be handled via a regional infrastructure payment system.

This means that South African banks will stop processing electronic EFT payments and collections within the CMA.

From September 2024, South African account holders will no longer be able to make EFT payments to account holders in other CMA countries.

South Africans will also not be allowed to receive EFT payments from other CMA countries like Namibia.

The final day of processing domestic EFT, including credit payments and EFT debit collections, to and from Lesotho and Eswatini, is 9 September 2024.

The Bank of Namibia extended the effective date of stopping processing cross-border EFT payments to 30 September 2024.

South African banks warn clients

Nedbank informed its clients that EFT could not be used by people making and receiving payments or collections to beneficiaries in a CMA country after September 2024.

“You can use our global payment platform, global transactions on the Nedbank Business Hub, or our global host-to-host solution to make and receive these payments,” it said.

It further warned that debit order collection processing will only be supported in-country and not between countries.

“Debit orders collected from accounts within the CMA will have to be initiated from an account domiciled in Namibia, Lesotho or Eswatini,” it said.

This will require access to an in-country banking service to submit debit order collections and the receivables and billing processing accounts.

Alternatively, these debtors can initiate payments from the respective CMA countries to you using a cross-border service.

Standard Bank said all payment flows between countries within the CMA will be done via the Swift platform and will no longer be processed via EFT rails.

Therefore, Swift (the Global Payment Society for Worldwide Interbank Financial Telecommunications), must be used to initiate all cross-border payments.

Absa said regulators have instructed banks to discontinue processing debit and credit EFT payments to Namibia. Credit and debit EFT payments will also be discontinued.

“If you want to continue making payments to Namibia, you can use the Swift service available through our relationship banking, international banking and foreign exchange teams,” it said.

“We understand that these changes may affect your banking experience, and we are committed to assisting you through this transition.”

FNB said due to regulatory requirements, EFT payments and collections between CMA countries will soon be discontinued.

“These payments will need to be initiated as Global Payments via Forex,” the bank told clients.

Capitec said due to a directive by the South African Reserve Bank, clients would no longer be able to receive money from or make EFT payments to certain banks in neighbouring countries.

“Capitec clients who currently receive money from, or make EFT payments to, Namibia, Lesotho and eSwatini through FirstRand, Standard Bank, Nedbank, Bank Windhoek and eSwatini Bank will no longer be able to do so,” it said.

“However, they will still be able to receive Swift payments from these banks,” Capitec added.

These changes are set to be disruptive for many businesses and families in the Southern African region.

Cross-border payments via Swift will take more time because of the increased checks and controls.