South Africa’s central bank is planning the most significant overhaul of the country’s cash system in decades.

South Africa’s central bank is planning the most significant overhaul of the country’s cash system in decades, proposing the creation of a cash-management utility, the rollout of white-label ATMs and stricter oversight of how physical money circulates to reduce costs and improve access.

Cash circulating through Africa’s largest economy exceeds 180 billion rand ($10.7 billion), or about 2.5% of gross domestic product, and still accounts for roughly two-thirds of all transaction volumes despite the growth of digital payments, according to Bloomberg.

Managing, transporting and securing physical cash cost about 90 billion rand last year, a burden largely borne by consumers, with crime accounting for 13% of the total.

The initiative, known as the Cash Smart Strategy, aims to ensure that cash remains accessible to low-income and rural communities that have limited digital payment options and often pay fees up to five times higher than wealthier urban users.

The reforms would mark the biggest change to cash circulation since the introduction of ATMs more than 40 years ago.

The South African Reserve Bank expects cash usage to decline by 30% to 40% once the country reaches digitisation levels comparable to those of India, Brazil and the European Union.

“It’s a very radical transformation of the industry,” Pradeep Maharaj, the head of the South African Reserve Bank’s Payments Ecosystem Modernisation Programme, said in an interview.

At the heart of the plan is the establishment of a cash utility jointly owned by banks, retailers and other stakeholders. The entity would resemble the Netherlands’ Geldmaat, which operates a unified ATM network on behalf of several major banks.

The utility would forecast cash demand and manage distribution, eliminating an estimated 480 million rand in indirect subsidies currently received by a small number of private companies that handle cash circulation for the central bank.

White-Label ATMs proposed

Under the proposal, ATMs, which are currently owned by banks such as Capitec Bank Holdings and FirstRand, would be transferred to the utility and converted into white-label machines accessible to customers of any bank at minimal or no cost.

“There’ll be complete interoperability, which would allow us to reduce fees to almost zero,” Maharaj said.

The plan was presented to banks this month, with consultations with industry experts set to begin in January. Full implementation could take up to three years. (Business Insider Africa)