Opening the Gates: How Central Banks Are Democratizing Payment Infrastructure Through APIs

# Opening the Gates: How Central Banks Are Democratizing Payment Infrastructure Through APIs

**The Quiet Revolution Reshaping Financial Access in South Africa**

For decades, the architecture of South Africa's payment system resembled a walled garden. Large commercial banks controlled the infrastructure, determined who could participate, and set the terms of access. Fintechs, startups, and innovative payment providers stood outside these walls, forced to partner with established banks or abandon their ambitions entirely. Consumers and small businesses paid the price through limited choice, higher costs, and slower innovation.

That era is ending. Driven by regulatory vision and enabled by Application Programming Interface (API) technology, South Africa's central bank is dismantling these walls and opening payment infrastructure to a new generation of participants. The implications extend far beyond technical plumbing—this transformation will determine whether South Africa's digital economy becomes more inclusive or remains the preserve of established players.

## PayShap: The Visible Face of Infrastructure Democratization

In March 2023, South Africa launched PayShap, an instant payment system that allows anyone to send and receive money in seconds using just a mobile number. By early 2026, the system had processed **461 million transactions** worth **R403 billion**, with **5 million registered ShapIDs** across **13 participating banks**.

These numbers tell a story of rapid adoption, but they obscure the more profound transformation happening beneath the surface. PayShap is not merely a faster payment method—it is the first large-scale demonstration of what becomes possible when payment infrastructure is built on open, API-driven principles rather than proprietary, bank-controlled systems.

PayShap is operated by PayInc (formerly BankservAfrica), South Africa's leading automated clearing house. In a move signaling the strategic importance of payment infrastructure, the South African Reserve Bank (SARB) acquired PayInc, bringing the operator of the country's payment rails directly under central bank control. This acquisition was not about consolidation—it was about creating the regulatory authority to open these rails to new participants.

## The API Architecture Behind Instant Payments

When a consumer initiates a PayShap transaction—sending R500 to a friend using only their mobile number—a complex choreography of API calls executes in under ten seconds:

1. The sending bank's mobile app calls PayInc's API to initiate the payment 2. PayInc's API queries the ShapID registry to resolve the mobile number to a bank account 3. The receiving bank's API confirms the account is valid and can receive funds 4. PayInc's clearing API debits the sender's account and credits the receiver's account 5. Both banks' APIs update account balances in real-time 6. Notification APIs send confirmation messages to both parties

Each step in this process relies on standardized APIs that allow different banks' systems to communicate seamlessly. This standardization is what makes the system "open"—any regulated financial institution that implements the required APIs can participate, without needing proprietary integration with every other bank.

Contrast this with the previous generation of payment systems, where each bank maintained bilateral connections with other banks, creating a web of proprietary integrations that made it prohibitively expensive for new entrants to join. The API-driven model reduces the cost of participation by orders of magnitude.

## SARB Vision 2025: Opening the National Payment System

In August 2025, the South African Reserve Bank announced a transformative policy: the National Payment System (NPS) would be opened to fintechs and non-bank payment service providers. This was not a minor regulatory adjustment—it represented a fundamental reimagining of who can participate in the core infrastructure of the financial system.

Under the previous framework, only licensed banks could directly access payment clearing and settlement systems. Fintechs had to operate through bank partnerships, creating dependency relationships that gave banks veto power over innovation. If a bank decided a fintech's business model competed too directly with its own services, it could simply terminate the partnership.

The new framework establishes a category of regulated Third-Party Payment Providers (TPPPs) who can access payment infrastructure directly through standardized APIs, subject to meeting security and regulatory requirements. This changes the power dynamic fundamentally—fintechs are no longer supplicants seeking bank permission, but independent participants with direct access to infrastructure.

The implications are profound. A small fintech serving informal traders in townships can now offer instant payment acceptance without needing to convince a major bank that this market segment is worth serving. A startup building cross-border payment solutions for migrant workers can access the same infrastructure as established remittance providers. Innovation is no longer gated by bank approval.

## Open Banking: Forcing API Access to Customer Data

Parallel to the opening of payment infrastructure, South Africa is moving toward open banking regulations that will require banks to provide API access to customer financial data—with customer consent—to regulated third parties.

This may sound technical, but the consumer impact is tangible. Today, if you want to use a budgeting app to track spending across multiple bank accounts, you typically provide your banking login credentials to the app, which then "screen scrapes" your account information by logging in as you. This is insecure, violates most banks' terms of service, and gives the app far more access than necessary.

Open banking replaces this with standardized APIs that allow apps to request specific, limited access to your financial data with your explicit consent. You authorize the app through your bank's secure authentication, and the app receives only the data you've approved—transaction history, for example, but not the ability to initiate payments unless you separately authorize that.

The UK implemented open banking regulations in 2018, forcing the nine largest banks to provide API access. The result was an explosion of innovation: budgeting apps like Emma and Yolt, lending platforms that assess creditworthiness using real transaction data rather than credit scores, and payment initiation services that bypass card networks entirely.

South Africa is following this model, but with a crucial difference: the regulatory framework is being designed from the outset to prioritize security. The UK's implementation revealed numerous API security vulnerabilities that attackers exploited. South Africa has the advantage of learning from these failures.

## The Economic Case: Why Democratization Matters

The benefits of opening payment infrastructure extend far beyond enabling fintech startups. The economic impact touches every participant in the payment ecosystem.

**For Consumers**: Competition among payment providers drives down transaction costs. PayShap transactions are significantly cheaper than traditional electronic funds transfers (EFTs), which can take days to clear and often carry fees. Instant, low-cost payments enable new use cases—splitting a restaurant bill, paying a street vendor, sending emergency funds to a family member—that were previously impractical.

**For Small Businesses**: Access to affordable payment infrastructure is transformative for small enterprises that previously operated cash-only due to the high cost of card acceptance. A township spaza shop can now accept instant payments via PayShap without needing expensive point-of-sale terminals or paying merchant service fees that eat into already-thin margins.

**For Fintechs**: Direct access to payment infrastructure eliminates the "bank tax"—the portion of revenue that fintechs previously had to share with bank partners in exchange for infrastructure access. This improves unit economics and makes it viable to serve lower-income customers who generate smaller transaction volumes.

**For the Economy**: Faster, cheaper payments increase the velocity of money. When a small business receives payment instantly rather than waiting days for an EFT to clear, that money can immediately be used to pay suppliers, employees, or rent. This acceleration of cash flow is particularly important for small enterprises operating with minimal working capital.

The South African Reserve Bank estimates that modernizing the National Payment System could add **R50 billion annually** to GDP through reduced transaction costs, improved cash flow, and increased economic activity enabled by better payment infrastructure.

## The Risks: Why API Security Cannot Be an Afterthought

The same API infrastructure that enables innovation also creates new attack surfaces. Every API endpoint that allows a fintech to initiate payments or access customer data is a potential entry point for attackers. The risks are not theoretical—they are already materializing.

**Authentication Bypass**: In 2024, security researchers discovered vulnerabilities in several European open banking APIs that allowed attackers to bypass authentication and access customer accounts. The flaws stemmed from improper implementation of OAuth 2.0, the authentication standard used by most banking APIs. South African financial institutions implementing open banking APIs face the same implementation challenges.

**API Parameter Tampering**: Attackers can manipulate API requests to access accounts they shouldn't have permission to view. For example, changing an account number in an API call from "12345" to "12346" to access someone else's transaction history. Proper authorization checks at the API level are essential, but many implementations fail to validate that the authenticated user actually owns the account they're requesting data for.

**Rate Limiting Failures**: APIs without proper rate limiting can be abused for brute-force attacks. An attacker might attempt thousands of payment initiation requests per second, hoping to find valid account combinations. Or they might scrape customer data at scale by iterating through account numbers. Effective rate limiting is essential but technically challenging when legitimate high-volume users (like payment aggregators) also generate thousands of API calls.

**Third-Party Risk**: When banks open APIs to fintechs, they create a shared responsibility model for security. A vulnerability in a fintech's application can expose bank customer data, even if the bank's own systems are secure. This creates a regulatory challenge: how much responsibility should banks bear for third-party security failures?

**Systemic Risk**: The interconnected nature of API-driven payment systems means that a security failure at one participant can cascade across the entire ecosystem. If an attacker compromises a fintech with access to multiple banks' APIs, they could potentially initiate fraudulent transactions across the entire system before the breach is detected.

## Infrastructure Requirements: Building Secure API Ecosystems

Opening payment infrastructure to new participants requires more than writing regulations—it demands significant investment in security infrastructure. The South African Reserve Bank and participating financial institutions must build robust technical foundations to make API-driven payments both accessible and secure.

**API Gateways and Management**: Centralized API gateways provide a single point for authentication, rate limiting, threat detection, and monitoring across all API traffic. Rather than each bank implementing security controls independently (with inevitable inconsistencies), a well-designed gateway ensures consistent security policies across the entire payment ecosystem. PayInc's role as the operator of payment infrastructure positions it to provide this centralized gateway function.

**Strong Authentication Standards**: OAuth 2.0 and OpenID Connect have become the global standards for API authentication in financial services, but implementation details matter enormously. South Africa's regulatory framework must specify not just which standards to use, but exactly how they must be implemented—which grant types are permitted, how tokens must be secured, how long they can remain valid. The UK's experience showed that leaving these details to individual banks' discretion resulted in wildly inconsistent security.

**Real-Time Monitoring and Threat Detection**: Traditional security monitoring focused on detecting threats after the fact—reviewing logs to identify suspicious activity hours or days later. API-driven instant payments demand real-time threat detection. If a fraudulent payment clears in ten seconds, detecting it ten minutes later is too late. Machine learning models that can identify anomalous API traffic patterns in real-time are essential.

**API Discovery and Inventory**: One of the most common API security failures is "shadow APIs"—endpoints that development teams created but security teams don't know exist. As banks and fintechs rapidly build new API-driven services, maintaining a comprehensive inventory of all APIs, their security controls, and their access permissions is critical. Automated API discovery tools that continuously scan for new endpoints are becoming essential.

**Comprehensive Testing**: Before any API is exposed to third parties, it must undergo rigorous security testing including penetration testing, fuzzing (sending malformed data to identify vulnerabilities), and authorization testing (verifying that users can only access data they're permitted to see). The South African regulatory framework should mandate minimum testing standards before APIs can be used in production.

**Incident Response Capabilities**: Despite best efforts, security incidents will occur. The question is whether they are detected quickly and contained effectively, or whether they spread undetected across the ecosystem. Participating institutions need incident response playbooks specifically designed for API security failures, with clear protocols for notifying other participants, isolating compromised systems, and coordinating remediation.

## The Regulatory Challenge: Balancing Access and Security

Regulators face a fundamental tension: opening payment infrastructure to promote innovation and competition, while ensuring that new participants meet rigorous security standards. Set the security bar too high, and only large, well-resourced fintechs can participate, defeating the purpose of democratization. Set it too low, and security failures undermine trust in the entire system.

The South African Reserve Bank's approach appears to be risk-based regulation: different levels of security requirements based on the sensitivity of the data accessed and the types of transactions permitted. A fintech that only reads transaction history faces less stringent requirements than one that can initiate payments. A provider handling small-value payments faces different requirements than one processing large corporate transfers.

This risk-based approach is sensible in principle, but implementation is complex. How do you define "small-value" in a way that prevents attackers from making thousands of small fraudulent transactions that collectively cause significant harm? How do you ensure that a fintech approved for read-only access doesn't find ways to escalate privileges to payment initiation?

The Protection of Personal Information Act (POPIA), South Africa's data protection law, adds another layer of complexity. Open banking APIs involve sharing customer financial data with third parties, which requires explicit customer consent and imposes obligations on both banks and fintechs to protect that data. Regulators must ensure that API access controls align with POPIA requirements—that customers can easily revoke consent, that data is only used for authorized purposes, and that breaches are promptly reported.

## Learning from International Experience

South Africa is not pioneering API-driven payment infrastructure—it is following a path blazed by the UK, EU, India, and Brazil. Each of these markets offers lessons.

**India's UPI Success**: India's Unified Payments Interface (UPI) launched in 2016 and has become the world's largest instant payment system, processing over **10 billion transactions monthly**. UPI's success stemmed from aggressive promotion of API access to fintechs, minimal transaction fees, and strong government backing. However, UPI has also faced significant fraud challenges, with losses exceeding **$100 million annually**. The lesson: rapid adoption without equally rapid security evolution creates vulnerabilities.

**UK's Open Banking Struggles**: The UK forced its largest banks to provide open banking APIs in 2018. Five years later, adoption remains modest—only about **7% of UK consumers** have used open banking services. The reasons include poor user experience (confusing consent flows), security concerns (high-profile API vulnerabilities), and lack of compelling use cases for average consumers. The lesson: API access alone doesn't guarantee adoption—you need consumer-facing applications that deliver clear value.

**Brazil's Pix Phenomenon**: Brazil launched Pix, an instant payment system similar to PayShap, in November 2020. Within two years, Pix had **140 million users** and processed more transactions than all card payments combined. Pix's success came from aggressive adoption incentives, including requiring all banks to participate and making Pix free for consumers. The lesson: regulatory mandates and zero fees drive adoption faster than market forces alone.

**EU's PSD2 Complexity**: The EU's Second Payment Services Directive (PSD2) mandated open banking APIs across all member states, but implementation has been fragmented. Each country interpreted the directive differently, creating a patchwork of inconsistent APIs that makes it difficult for fintechs to operate across borders. The lesson: harmonization matters—inconsistent standards undermine the network effects that make open infrastructure valuable.

South Africa can learn from all of these experiences. The regulatory clarity and centralized infrastructure (PayInc as a single operator) positions South Africa to avoid the EU's fragmentation. The focus on security from the outset can prevent India's fraud challenges. And the mandatory participation of major banks can drive the adoption that the UK struggled to achieve.

## The Path Forward: From Infrastructure to Inclusion

Opening payment infrastructure through APIs is a necessary but not sufficient condition for financial inclusion. The infrastructure creates possibility; realizing that possibility requires deliberate effort to ensure that the benefits reach beyond urban, digitally-savvy consumers.

**Rural Access**: Much of South Africa's population lives in areas with limited internet connectivity. API-driven payment systems that require smartphones and data connections risk excluding these communities. Solutions like USSD-based access to PayShap (allowing feature phone users to send payments via simple text codes) are essential to ensure rural inclusion.

**Digital Literacy**: Giving consumers access to sophisticated financial services through APIs is meaningless if they don't understand how to use them safely. Financial literacy programs must evolve to include digital security—teaching consumers to recognize phishing attempts, protect their authentication credentials, and understand what permissions they're granting when they authorize API access.

**Language and Localization**: South Africa has 11 official languages, but most fintech applications operate primarily in English. True financial inclusion requires localization—not just translating interfaces, but designing user experiences that reflect the cultural and linguistic diversity of the population.

**Informal Economy Integration**: A significant portion of South Africa's economy operates informally—street vendors, township businesses, domestic workers. These participants often lack the formal documentation (proof of address, tax numbers) that traditional financial services require. API-driven payment systems must find ways to serve these users without compromising security or enabling money laundering.

## Conclusion: The Infrastructure Moment

South Africa is experiencing what historians of technology call an "infrastructure moment"—a brief window when fundamental systems are being redesigned and the decisions made will shape possibilities for decades to come.

The choice to build payment infrastructure on open, API-driven principles rather than proprietary, bank-controlled systems is not merely technical—it is profoundly political and economic. It determines whether South Africa's digital economy will be inclusive or exclusive, competitive or monopolistic, innovative or stagnant.

But infrastructure alone does not determine outcomes. The API-driven payment rails that PayInc operates, the open banking APIs that banks are beginning to expose, and the regulatory framework that SARB is constructing create possibility. Whether that possibility translates into genuine financial inclusion, vibrant fintech innovation, and economic growth depends on the security, usability, and accessibility of the systems built on this infrastructure.

The organizations that recognize this moment and invest in comprehensive API security will be the ones that thrive in South Africa's API-driven payment future. Those that treat API security as a compliance checkbox rather than a strategic imperative will find themselves explaining breaches, facing regulatory sanctions, and losing customer trust.

The gates are opening. The question is whether what emerges will be secure, inclusive, and transformative—or whether security failures and poor implementation will squander this opportunity for genuine democratization of financial infrastructure.

The answer will be written in the API security decisions made in the next few years.

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**About Tegra Solutions**

Tegra Solutions partners with Salt Security to deliver world-class API security solutions across Southern Africa. We help financial institutions, fintechs, and payment providers secure their API ecosystems as they participate in South Africa's evolving payment infrastructure. Our team understands the unique regulatory and technical challenges of API-driven financial services and can help your organization build secure, compliant API infrastructure. Contact us to learn how we can support your API security journey.