Reserve Bank wants to make big changes to how gift cards work in South Africa

Gift cards in South Africa have been regulated under consumer protection law. The Consumer Protection Act (CPA) says a gift card must be valid for at least three years and that unused balances cannot expire early. 

However, this law was written assuming that the same company issuing the card is also the one redeeming it. 

According to ENSafrica, the biggest law firm in Africa, this no longer matches how modern gift cards and payment systems work.

The South African Reserve Bank (SARB) now wants to change this. It has proposed new rules that would treat many gift cards more like financial products.

The draft directive introduces the idea of a “closed-loop payment system.” This is when the same company provides the service on both sides of the transaction, and the card or voucher cannot be used across other systems.

According to ENSafrica, examples include mobile-money vouchers and store-of-value wallets, which are very similar to many retail gift cards.

Under the proposal, anyone running such a system would need to register with the SARB and meet strict rules on risk management, operations, and compliance.

Gift cards that work across multiple merchants, such as shopping-centre cards or airline-alliance vouchers, are even more clearly in the line of fire. 

ENSafrica explained that these will likely be classed as “payment instruments,” which means they fall directly under SARB regulation. 

Even single-store vouchers could be treated the same way if SARB decides they involve “storing value” or transferring money by taking cash upfront and allowing later redemption.

This would also change how consumer-protection law applies. Section 10 of the Financial Sector Regulation Act says the CPA does not apply if a product falls under financial regulation.

Two new regimes

ENSafrica noted that once the new rules are in place, some gift cards will move out of the CPA’s protection and into SARB’s system. This would create two regimes.

On the one hand, simple loyalty vouchers or gift cards for one merchant will stay under the CPA, with the same protections as before.

On the other hand, cards that allow redemption at multiple merchants, top-ups, transfers between people, or cash-outs will need SARB registration.

These products will face transaction limits of R5,000 a day or R50,000 a month, and issuers will have to keep client money separate from their own funds.

For businesses, the changes could be significant. ENSafrica said issuers of regulated gift cards will have to apply to become “payment institutions,” set up ring-fenced trust or settlement accounts, and submit to Reserve Bank supervision.

They will also fall under anti-money laundering rules. Draft PCC 118A lists issuers of payment instruments as “accountable institutions,” meaning they must check customer identities, monitor transactions, and report suspicious behaviour.

This could force companies to rethink how they offer gift cards. ENSafrica warned that the ability to earn interest on money collected from cards, to allow cash-outs, or to let users reload cards may be limited unless businesses get further approvals or redesign their products to remain under the CPA’s simpler rules.

The SARB’s goal is to reduce fragmentation in South Africa’s payment system. Closed-loop products, which lock customers into small, isolated systems, are seen as a problem.

While not every voucher will need authorisation, ENSafrica said the rules are tightening. “Issuers must ask whether funds can move beyond a single merchant. If they can, SARB registration and compliance obligations will follow.”

This means a large part of the gift card industry is likely to be subject to direct Reserve Bank regulation. 

Businesses that want to keep things simple will need to design gift cards that work only at a single merchant and cannot be transferred.

Those that want broader, more flexible cards will have to prepare for the costs and compliance requirements of becoming regulated payment institutions.

Issued on BusinessTech by Malcolm Libera | https://businesstech.co.za/news/finance/836888/reserve-bank-wants-to-make-big-changes-to-how-gift-cards-work-in-south-africa/