A credit card is essentially a payment instrument issued by a financial institution and linked to a credit card account with a pre-approved credit limit, which enables the Cardholder to purchase goods and services from merchants who have agreed to accept the card. The PCH participant providing the card and the line of credit to its customer is referred to as the Issuer, while the participant accepting and processing the transaction from the merchant is known as the acquirer. In South Africa, most banks issue either Amex, Diners, UnionPay, Visa or MasterCard branded credit cards, and in general, global operating regulations are followed and have been adopted by the PCH participant group. However, there are exceptions where the participants have agreed to change or amend some of these rules to better reflect local needs or risk considerations.

There are two main categories of credit cards available to customers, namely an “embossed” credit card, which would allow usage at Merchants with a card reading device such as a Point of Sale (POS) terminal or at an ATM, but also in circumstances where the card cannot be physically read by a device, such as the Internet or even mail order or telephone order environments. These cards can also operate below a so-called “Floor Limit,” which means that for purchases below a certain amount of available credit, the card holder does not need to be verified. One of the features of credit cards that is unique to South Africa is the budget facility that clients can opt for at the time of purchase at a POS. This means that clients can upfront decide to pay off the outstanding credit over a pre-defined period (of say, 6 months), rather than making the transaction part of the general pool of credit, of which a minimum percentage needs to be paid off at the end of each month (eg. 10%); the outstanding balance is then revolved into the next month and interest added to that.

Embossed cards used to be verified by the signature of the cardholder only, although as these cards were migrated to EMV chip technology, verification is by done with the cardholder PIN. South Africa has made good progress with migration to EMV Chip cards, and signature verification is rarely required.

A debit card is a payment instrument linked to a deposit account, such as a current cheque account, savings account, or transaction account. Although some of these accounts could go into overdraft, they are generally in debit or pre-funded and thus have a lower credit risk exposure when compared to credit cards.

There are a number of different debit cards available to the South African public. By far the most popular and widely used of these is the online, PIN-based category. These debit cards only work in an environment where the card can be physically read by a card reading device (such as a merchant terminal) or ATM, is authorised by a PIN entry, and immediately goes online to the Issuer to ensure that sufficient funds are available for authorisation of the transaction. They can therefore not be used in an Internet environment, nor for mail orders, telephone calls, or even with POS terminals that are “off-line.”.

Over the past few years, almost all debit cards have been migrated from magnetic stripe to Chip technology, which has resulted in off-line limits being determined by each individual card and transactions being PIN authenticated.

A third category of debit card is the pre-paid card. Specific examples of these cards include gift cards, wages, and others. In reality, these cards function no differently than debit cards. In other words, PIN-based or, in some rare cases signature-based.

Due to the fact that in South Africa, for various regulatory reasons, normal credit cards were not accepted at fuel forecourts, a special category of card was developed by some banks for the sole purpose of use at petrol stations (for fuel and oil purchases, and sometimes for repairs and maintenance), as well as at toll roads in later years.

These are generally signature-based cards, with their own floor limits, and are branded by the issuing bank concerned (ie. not Visa, or MasterCard). The interchange also flows from Issuer to Acquirer (rather than the other way round as is normal practice), from which the fuel retailer sometimes receives a small rebate.

The bank customer may opt to link the card to either a credit card account or a current account, therefore making it either a special form of a credit card or debit card.

Five of the banks, which have fleet management divisions, currently also offer mag stripe based fleet cards. These cards also operate in a so-called three-party commercial construct. The actual payment instructions, however, are cleared in the normal four party environments through PayInc. In other words, commercial arrangements are closed, while payment arrangements (which include the PCH and operations) are open, as all four acquirers accept all five Issuers’ cards. Over the next year or two, all fleet cards will move to a EMV chip card and 4 party model as used with current credit cards in the market, and the existing 3 party model will be sunsetted.

The fleet card is linked to a fleet card system, which not only controls credit or pre-paid amounts available, but also records mileage, fuel consumption, vehicle maintenance, the name of the driver and other information useful to fleet owners.

A withdrawal by a customer, using an ATM, constitutes a real-time withdrawal by such customer out of their own account. ATMs may either belong to or be contracted to the bank holding the account of the customer or to another bank. A customer initiates the transaction by inserting their card in the ATM, after which the ATM will request that the Personal Identification Number (PIN) be keyed to verify that the transaction is in fact being initiated by the customer. This requirement protects the customer from the system being misused to obtain funds fraudulently from the customer’s account. As the customer is responsible for the safekeeping of both the card and the PIN, using both the card and PIN will be deemed to have been initiated by the customer.

A transaction initiated at an ATM is immediately passed on to the bank, where the customer’s account is held, together with the PIN encrypted. The issuing bank (customer’s bank) has the capability through its security system to verify the correctness of the PIN without the PIN ever being exposed to anybody during the process. All transactions are uniquely referenced to facilitate easy identification of the transaction where subsequent inquiry or audit is needed.

Having verified the PIN and ensured that the customer has sufficient funds in their account to cover the requested withdrawal, the customer’s bank (the issuing bank) will debit the account of the customer, then send a message via the PCH System Operator (PSO) through the bank controlling the ATM, authorising the amount requested to be paid out. The ATM would then proceed with dispensing the authorised amount if it contains sufficient banknotes to make the payment.

Normally, if any one of the required messages or actions fails to be executed, the ATM and/or the system(s) of the bank(s) and PCH System Operator (PSO) will record such an error with a code indicating the type of failure, send an error message to the other parties to indicate that the action has failed, and the system(s) will reverse any entries that could not be completed.

All banks involved in the exchange of ATM transactions are required to reconcile the records of transactions on a daily basis so as to ensure that the system is kept in balance and any incomplete transactions can be rectified quickly. A bank receiving a query regarding anomalous transactions has seven working days to resolve the query.

In the unlikely event that a customer’s account is debited with the withdrawal without the customer actually having received such funds, the two banks involved will communicate with each other, having identified the error during the daily reconciliation processes or when a customer complaint is received. The funds involved will be returned to the affected customer and the service-provider bank.