Understanding card payments in South Africa
Summary: This guide explains how card payments work in South Africa, from authorisation to settlement. It also covers common challenges and how businesses can improve reliability and approval rates.
In South Africa, card payments remain the most popular digital payment method across various industries, including e-commerce and travel. Stitch Product Manager Josh Gordon explains how card payments work, highlighting key players and potential friction points.
The four-party model
Card payments in South Africa operate on a four-party model:
- Merchant: The business receiving the payment
- Payer: The individual making the payment
- Issuing bank: The bank that issued the payer's card
- Acquiring bank: The bank that processes the payment for the merchant
Essentially, these four parties communicate with one another through messages sent via networks like Mastercard and Visa.
Josh explains how a typical online card payment would work, “When a customer initiates an online payment and enters their card details via a merchant’s app or website, a payment gateway like Stitch collects those card details on behalf of a merchant and facilitates the movement of the card information from the payer to acquiring bank then onto the issuing bank, and eventually back to the merchant to confirm that the payment has completed.”
Friction points and the case for one-click payments
“One common friction point for South African consumers is the need to repeatedly enter card details for online transactions. One of the ways Stitch abstracts this is by tokenising card details, securely storing them on behalf of merchants.”
This means When a user returns to the merchant's website, their saved card details are displayed, enabling one-click payments. This streamlines the checkout process and significantly enhances the user experience.
FAQs
How do card payments work in South Africa?
Card payments involve authorisation through local and international card networks, followed by clearing and settlement between banks. The process ensures funds move securely from the customer’s bank to the merchant.
Which card networks operate in South Africa?
Major networks include Visa and Mastercard, alongside local banking infrastructure that supports domestic card processing and settlement.
What affects card payment approval rates in South Africa?
Approval rates are influenced by factors such as issuer decisioning, fraud controls, transaction data quality, and payment routing reliability.
How long does card settlement take in South Africa?
Settlement timelines vary by bank and acquirer but typically occur within one to three business days, depending on the transaction type and merchant agreement.
What challenges do businesses face with card payments locally?
Common challenges include downtime, false declines, limited routing options, and delayed settlements, particularly during peak trading periods.
How can businesses improve card payment reliability?
Businesses can improve reliability by using payment providers with redundant infrastructure, intelligent routing, real-time monitoring, and local acquiring capabilities.
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