By Albertus Mutonga Matongela
This is the third article in a series on payment systems in Namibia. Here we focus on providing you with key stakeholders in the National Payment System. Happy reading.
THERE are several stakeholders and participants in the National Payment System in Namibia. They have certain responsibilities and obligations in line with their mandate as institutions and their rights as consumers of financial and payment services. Key stakeholders are depicted and discussed below:
Bank of Namibia
The Bank of Namibia was established in 1993 by the Act of Parliament, Bank of Namibia Act, 1992 (Act No. 8 of 1992). The foregoing Act has since being amended and the Bank in terms of the Bank of Namibia Act, 1997 (Act No. 15 of 1997) has the mandate to: promote and maintain a sound monetary, credit and financial system in Namibia and sustain the liquidity, solvency and functioning of that system; promote and maintain internal and external monetary stability and an efficient payment mechanism; foster monetary, credit and financial conditions conducive to the orderly, balanced and sustained economic development of Namibia; serve as the Government’s banker, financial advisor and fiscal agent; and assist in the attainment of national economic goals.
The Bank of Namibia has specific functions in terms of the Payment System Management Act, 2003 (Act No. 18 of 2003) for ensuring efficiency and safety in the NPS. Its functions are to: oversee, inspect and monitor the NPS, the operation of the Payment System Management Body, system participants and service providers; establish and operate a settlement system, and to authorise people to participate in the clearing and settlement systems and to withdraw such authorisation; and authorise the operation of the Payment System Management Body.
The Bank of Namibia does not only operate and oversee the settlement system, Namibia Inter-bank Settlement System (NISS) it is also a participant in the system. It also oversees and it is a participant in retail payment systems that include the Electronic Fund Transfer System (EFT), and Cheque Processing System (CPS). All these systems are owned and operated by Namclear Pty Limited.
Payment Association of Namibia
The Payment Association of Namibia (PAN) is not a participant in the National Payment System (NPS) as such, because it does not conduct payments in the manner like payment system participants (discussed next) would do. Its mandate, with respect to payment systems, is in line with that of Bank of Namibia of ensuring stability and safety in the NPS. Consequently, the PAN performs specific aspects in the NPS in line with the Payment System Management Act, 2003 (Act Number 18 of 2003).
Established in terms of the Payment System Management Act in 2006, PAN has several functions to play – as shown in Chart 2 – in the interest of its members, payment system participants:
It authorises payment system service providers to provide payment system services to payment system participants;
It sets technical standards, procedures and policies relevant to certain aspects of the NPS; and
It represents interests of its members, participants in payment systems.
PAN is structured in such a way that specific people handle specific assignments. Its abridged structure is shown hereunder:
The Payment System Management Act makes provision for the association to establish any committee or working group to deal with various aspects of the NPS. There is Payment Clearing House Participating Group or PCH PG for short governing the affairs of the participants in one or more payment streams.
PAN has a Risk Advisory Committee tasked with: reviewing and recommending to PAN the adoption of or changes to the entry and participant criteria for authorisation to act as payment system service provider; considering and advising on any issues or concepts relative to risk with regard to the authorisation of a payment service provider, and reviewing and recommending the authorisation of the payment system service provider in terms of the approved entry and participation criteria.
Payment system participants
Apart from the Bank of Namibia, there are other direct participants in key payment systems like NISS and retail clearing systems. Bank Windhoek, Nedbank, Standard Bank and First National Bank are all direct participants in the above-mentioned systems as the following chart shows.
Where an institution participates in retail payment systems through a direct participant like in the case of Namibia Post Limited with its smart card product, this is called indirect participation as the following chart illustrates.
It is important to stress here that participation in the payment systems is open to any person meeting terms and conditions of relevant laws. As mentioned already the Bank of Namibia in terms of the Payment System Management Act may authorise people to participate in the clearing and settlement systems. One can say that participation in the payment systems in Namibia is fair because the playing field is levelled. This is in line with international best standards and practices in payment systems that encourage fairness and equal access to payment systems. The case in point is Core Principles for Systemically Important Payment Systems developed by the Bank for Internal Settlements (BIS). Systemically Important Payment Systems (SIPS) are systems such that when they fail they can cause disruptions in the economy.
The direct participants in payment systems have been rolling-out latest technologies in recent years. In the early 1990s, one could only get cash in banking halls of banking institutions. Fortunately nowadays with the advent of Automated Teller Machines (ATMs) and subsequent innovations in the card market, one can now get cash anytime and anywhere. It is now possible to conduct banking activities in the bedroom or in the bush through cellphone banking technology. Thanks to the favourable environment provided by the Government of the Republic of Namibia and Bank of Namibia for making banking and payments advancements possible. The sky is the limit and who knows our payment technologies might change for the better in future.
The growth in size by banking institutions or payment systems participants is also enabling them to roll out newest technology. In asset terms, banking institutions have grown in recent years. They are increasing in size because of a high demand for financial services not only from middle- to high-income groups but also from low-income earners. One can only say that banking institutions in Namibia are embracing the Government’s call on access to financial services by low-income earners.
Payment system service providers
The payment service providers provide specific services within the National Payment System. Payment service providers that currently fall under the mandate of the Payment Association of Namibia (PAN) include Namclear Pty Limited and Smart Switch Namibia (SSN). Namclear Pty Limited is currently recognised by PAN and was established in terms of the Companies Act in 2003 to perform clearing services for cheque, EFT and card payments of payment system participants. There are three clearing systems under its control, which are card system, EFT system and cheque processing system.
Namclear is governed by a board of directors drawn from payment system participants and managed by a chief operating officer.
SSN was authorised by the PAN in 2007 to provide payment system services related to smart card transactions. It is equally owned by Namibia Post Limited and NET 1 Universal Payment System Technologies based in the United States. Other specific roles for SSN are to: roll-out point-of-sale devices to merchants that accepts Namibia Post Limited issued smart cards, and route or switch smart card transactions for processing and authorisation.
SSN is governed by a board of directors drawn from the private sector and managed by an executive chairman.
In the next article we will cover other stakeholders in the National Payment System.