Theme 1, Study Unit 2 - The role players of the payment system

Question 1

What is the National Payment System ?

Answer 1

• The National Payment System (NPS) refers to a set of instruments, procedures, agreements, laws, and rules that allow for the transfer of funds between financial institutions, facilitating the movement of money.
• It comes into operation when a user makes a payment, and that payment goes through the system, ultimately being recorded in the books of the South African Reserve Bank (SARB).

Question 2

What is the role of the South African Reserve Bank (SARB) in the NPS ?

Answer 2

• Oversee and regulate the NPS.
• Establish, monitor, and supervise systems for payment, clearing, and settlement.
• Act as a central body ensuring that payment systems operate efficiently, securely, and within the law.

Question 3

Discuss the payment process.

Answer 3

1. Customer makes payment.
2. Merchant’s bank receives the request.
3. Approval or Decline.
4. Payment Gateway as the Middleman.

Question 4

What are the key aspects of the Bank-Customer relationship ?

Answer 4

Loan relationship.

• When the customer deposits money the bank uses this money to fund loans or investments, making it a loan to the bank.
• When the customer borrows from the bank the customer becomes the debtor, and the bank becomes the creditor.

Mandate.

• The bank agrees to carry out one or more banking services for the customer (such as making payments, issuing cheques, etc.), which creates a mandate relationship.

Deposit.

• When the customer deposits money, the bank becomes the owner of the funds and the customer retains a personal right to claim the money back.

Question 5

What are the requirments for a valid bank-customer
relationship ?

Answer 5

• Consensus.
• Authority.
• Capacity to Contract.
• Formality.
• Lawfulness.

Question 6

What are the specific duties of the bank ?

Answer 6

These include keeping records of the customer’s accounts, repaying money on demand, and carrying out the customer’s instructions.

Question 7

What are the general duties of the bank ?

Answer 7

• Exercise reasonable care and skill.
• Secrecy and confidentiality.
• Act in good faith.

Question 8

What are the duties of the customer ?

Answer 8

• Pay agreed fees and charges.
• Exercise reasonable care.
• Notify the bank of fraud.
• Reimburse the bank for any expenses incurred when carrying out its duties.

Question 9

Discuss the role of the Code of Banking Practice.

Answer 9

• The Code of Banking Practice sets out the minimum standards of service and conduct expected from banks.
• It is a voluntary code to which banks subscribe and covers areas such as transparency, confidentiality, and ethical conduct.
• Banks must adhere to the decisions made by the Ombudsman for Banking Services, who handles complaints related to banking services.

Question 10

What are the metods for termination of the Bank-Customer relationship ?

Answer 10

• Notice.
• Death or insolvency.
• Bank’s decision.
• Dissolution of the Bank.

Question 11

Discuss the Bank’s decision for termination.

Answer 11

• In Bredenkamp, the court ruled that a bank could terminate its relationship with a customer if the bank’s contract or business risk analysis indicated it was appropriate, even if the reasons for termination were not disclosed to the customer.
• In Pinto, the court found that the bank was justified in flagging Pinto’s account and reporting the transaction under the Prevention of Organised Crime Act (POCA) and the Financial Intelligence Centre Act (FICA), as they had a duty to prevent money laundering and illegal transactions.