VHD 320 Theme 3: Electronic Payment Methods
STUDY UNIT 1: ELECTRONIC
PAYMENT
TEXTBOOK PAR 32.01–32.108
Reading list
1. Nissan South Africa (Pty) Ltd. v Marnitz NO and Others (Stand 186 Aeroport (Pty) Ltd. Intervening)
[2006] 4 All SA 120 (SCA);
2. Schulze 2004 SA Merc LJ 667
3. Gilbey Distillers and Vintners (Pty) Ltd v ABSA Bank Ltd as discussed by Malan, Pretorius and Du Toit
Malan on Bills of Exchange, Cheques and Promissory Notes (5th edition 2009) par 213–214.
4. Pretorius and Seanego 2014 THRHR 512.
1. THE SOUTH AFRICAN PAYMENT SYSTEM;
• Our payment system allows for the circulation of physical money/cash or the transfer
of value through an electronic system of debits and credits
o The customer will either use cash or issue a payment instruction to a financial
institution when they wish to make a payment or have funds released
o The transfer of value as a payment as a system of debits and credits can be
initiated or facilitated through paper-based instruments like cheques, debit
orders, stop orders or it can be done through an electronic system where you
log onto a platform and pay a beneficiary or use a bank debit card at a retail
store to pay for goods
o Unless cash is used, payment through transfer of value has two basic steps:
① Instruction → given by a person wanting to pay to a financial
institution (usually)
• Payment instruction is given to financial institution which holds
the funds.
② Transfer → the financial institution then transfers the funds according
to instructions received from the beneficiary account
• The financial institution will transfer the funds to the beneficiary’s
account at the same or another financial institution
o Where debtor who initiates the process to transfer funds to the beneficiary
creditor (make payment) → referred to as a credit transfer and the funds are
‘pushed’ through the payment system from the debtor to the creditor
o Where the creditor initiates the process → instruction is given to the financial
institution to collect payment from the debtor and is referred to as a debit
transfer where the funds are ‘pulled’ through the system into the creditor’s
account
o This is subject to clearing systems (e.g. ACB or Bankserv) where the transactions
are verified and inter-bank agreements through multilateral set-off
▪ With paper-based payments the payment is authenticated by
signature and the completed document has to be physically
Page | 1
, VHD 320 Theme 3: Electronic Payment Methods
transferred between parties and/or financial institutions to obtain
payment
• This ≠ the case with electronic payment instructions where the
payment instruction to transfer or release funds is given
electronically and authentication takes place through a variety
of electronic inputs, like account numbers and passwords
• Customer-initiated electronic payment instructions are done in
a number of ways, e.g. EFTs, card payments, POS, internet
banking, mobile banking, ATMs, eMoney and eWallets
2. THE BANKER-CUSTOMER RELATIONSHIP IN CREDIT TRANSFERS;
• The nature of the banker-customer relationship in credit transfers = based on a contract
of mandate
o Ito the general contract of mandate, the common law requires the bank to
exercise reasonable care and skill when performing ito their given mandate,
to do so within a reasonable time, in good faith and without negligence
▪ The standard that banks will be measured against will be that of the
reasonable bank in similar circumstances
▪ Failure to comply with these duties may result in a bank being held
strictly liable for its breach
• This, according to Malan et al, includes installing and
maintaining security systems that are in line with international
trends, that there is a duty on banks to match account numbers
with the names of beneficiaries
o The corresponding duty at common law requires the customer to draw up their
payment instructions with reasonable care – this duty is confirmed in the South
African Code of Banking Practice
▪ Customers are also required to take safety precautions when using
cards, the internet, cell phone and telephone banking and ATMs and
to take due care when transacting
• The Code of Banking Practice = an agreement that banks
subscribe to wherein they accept the jurisdiction of the banking
adjudicator and agree to abide by the adjudicator’s rulings
should there be a conflict between a bank and its customer
o However, the Code ≠ enforceable in a court of law, may
not be used to interpret the legal relationship between a
bank and a customer and may not be used to establish
a tacit contract, term or trade usage
o The Code does, however, contain valuable safeguards
for a customer and the principles of the Code are often
incorporated into the standard-form contract for various
services offered to the SA banking customer
Page | 2
STUDY UNIT 1: ELECTRONIC
PAYMENT
TEXTBOOK PAR 32.01–32.108
Reading list
1. Nissan South Africa (Pty) Ltd. v Marnitz NO and Others (Stand 186 Aeroport (Pty) Ltd. Intervening)
[2006] 4 All SA 120 (SCA);
2. Schulze 2004 SA Merc LJ 667
3. Gilbey Distillers and Vintners (Pty) Ltd v ABSA Bank Ltd as discussed by Malan, Pretorius and Du Toit
Malan on Bills of Exchange, Cheques and Promissory Notes (5th edition 2009) par 213–214.
4. Pretorius and Seanego 2014 THRHR 512.
1. THE SOUTH AFRICAN PAYMENT SYSTEM;
• Our payment system allows for the circulation of physical money/cash or the transfer
of value through an electronic system of debits and credits
o The customer will either use cash or issue a payment instruction to a financial
institution when they wish to make a payment or have funds released
o The transfer of value as a payment as a system of debits and credits can be
initiated or facilitated through paper-based instruments like cheques, debit
orders, stop orders or it can be done through an electronic system where you
log onto a platform and pay a beneficiary or use a bank debit card at a retail
store to pay for goods
o Unless cash is used, payment through transfer of value has two basic steps:
① Instruction → given by a person wanting to pay to a financial
institution (usually)
• Payment instruction is given to financial institution which holds
the funds.
② Transfer → the financial institution then transfers the funds according
to instructions received from the beneficiary account
• The financial institution will transfer the funds to the beneficiary’s
account at the same or another financial institution
o Where debtor who initiates the process to transfer funds to the beneficiary
creditor (make payment) → referred to as a credit transfer and the funds are
‘pushed’ through the payment system from the debtor to the creditor
o Where the creditor initiates the process → instruction is given to the financial
institution to collect payment from the debtor and is referred to as a debit
transfer where the funds are ‘pulled’ through the system into the creditor’s
account
o This is subject to clearing systems (e.g. ACB or Bankserv) where the transactions
are verified and inter-bank agreements through multilateral set-off
▪ With paper-based payments the payment is authenticated by
signature and the completed document has to be physically
Page | 1
, VHD 320 Theme 3: Electronic Payment Methods
transferred between parties and/or financial institutions to obtain
payment
• This ≠ the case with electronic payment instructions where the
payment instruction to transfer or release funds is given
electronically and authentication takes place through a variety
of electronic inputs, like account numbers and passwords
• Customer-initiated electronic payment instructions are done in
a number of ways, e.g. EFTs, card payments, POS, internet
banking, mobile banking, ATMs, eMoney and eWallets
2. THE BANKER-CUSTOMER RELATIONSHIP IN CREDIT TRANSFERS;
• The nature of the banker-customer relationship in credit transfers = based on a contract
of mandate
o Ito the general contract of mandate, the common law requires the bank to
exercise reasonable care and skill when performing ito their given mandate,
to do so within a reasonable time, in good faith and without negligence
▪ The standard that banks will be measured against will be that of the
reasonable bank in similar circumstances
▪ Failure to comply with these duties may result in a bank being held
strictly liable for its breach
• This, according to Malan et al, includes installing and
maintaining security systems that are in line with international
trends, that there is a duty on banks to match account numbers
with the names of beneficiaries
o The corresponding duty at common law requires the customer to draw up their
payment instructions with reasonable care – this duty is confirmed in the South
African Code of Banking Practice
▪ Customers are also required to take safety precautions when using
cards, the internet, cell phone and telephone banking and ATMs and
to take due care when transacting
• The Code of Banking Practice = an agreement that banks
subscribe to wherein they accept the jurisdiction of the banking
adjudicator and agree to abide by the adjudicator’s rulings
should there be a conflict between a bank and its customer
o However, the Code ≠ enforceable in a court of law, may
not be used to interpret the legal relationship between a
bank and a customer and may not be used to establish
a tacit contract, term or trade usage
o The Code does, however, contain valuable safeguards
for a customer and the principles of the Code are often
incorporated into the standard-form contract for various
services offered to the SA banking customer
Page | 2
