NPS Vision and Strategy Document 2025

Eswatini National Payment
System Vision 2025
NPS Vision and Strategy Document
2021–2025

i
Table of contents
Executive summary................................................................................................................................1

1. Introduction ....................................................................................................................................6
2. Policy context.................................................................................................................................9
3. Eswatini NPS governance and objectives................................................................................11
4. Payment trends in Eswatini ........................................................................................................13
5. Strategic imperatives ..................................................................................................................31
6. Implementation of the strategic imperatives and enablers....................................................44
7. Annexure ......................................................................................................................................48
8. Glossary........................................................................................................................................49
9. Stakeholder list............................................................................................................................51
   List of tables
   Table 1 2021–2025 NPS strategic imperatives..................................................................................3
   Table 2 CBE endorsements of key ecosystem development areas ...............................................4
   Table 3: Distribution of financial access points in Eswatini (2015–2019).....................................13
   Table 4: POS and mobile money P2B transactions volumes, values and average transaction
   values (2018–2019) .............................................................................................................................26
   Table 5: Mobile phone transaction volumes by method of access (2018–2019)........................27
   Table 6: Mobile phone transaction values by method of access (2018–2019) ...........................27
   Table 7. Key actions and responsibilities to achieve the strategic imperatives...........................46
   Table 8 CBE endorsements of key ecosystem development areas .............................................47
   Table 9 Glossary of terms ...................................................................................................................50
   Table 10 Stakeholder list for remote consultations .........................................................................51
   List of figures
   Figure 1: Proportion of population residing within 30 minutes of various financial access points
   (2014/2018) ..........................................................................................................................................14
   Figure 2: Financial Access strands (2014 and 2018)......................................................................15
   Figure 3: Number of depositors with commercial banks (2014–2018).........................................16
   Figure 4: Number of cards 2015–2018 .............................................................................................16
   Figure 5: Mobile money subscriptions 2015–2019 .........................................................................17
   Figure 6: Mobile cellular subscriptions in Eswatini per 100 inhabitants (2014–2017)................17
   Figure 7: Online/app banking and mobile/cell phone banking (USSD), 2018 .............................18
   Figure 8: Use of payment methods (% of payers) by use case .....................................................19
   Figure 9: Method of receiving state monies .....................................................................................20
   Figure 10: SWIPSS utilisation volumes and values (2014–2018)..................................................20
   Figure 11: Utilisation of RTGS (transaction value/GDP) (2015–2018)..........................................21
   Figure 12: ECH volumes per instrument (2014–2018) ...................................................................21
   Figure 13: ECH values per instrument (2014–2018).......................................................................22
   Figure 14: Utilisation of Automated Clearing Houses (Transaction value/GDP) (2015–2018)..23
   Figure 15: Total volumes and values of mobile money transactions (2016–2019).....................24
   Figure 16: Proportion of inactive mobile money customers in 2019 ............................................24
   Figure 17: Aggregate volume of mobile money transactions by use cases (2016 to 2019) .....25
   Figure 18: Aggregate value of mobile money transactions by use cases (2016–2019) ............25
   Figure 19: Average mobile money transaction values by use case (2016–2019) ......................25

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Figure 20: Volumes and Values of cross-border flows on SADC-RTGS (2017–2019)...............28
Figure 21: Eswatini remittance flows (2014–2018)..........................................................................29
Figure 22: Cross-border remittance senders and receivers (past 12 months) (2018)...............48
Figure 23: Method of receiving domestic remittances (% of domestic remittance receivers)
(2018) ....................................................................................................................................................48

iii
Disclaimer
This document serves as the second preliminary draft document of the Eswatini National Payment System Vision 2025: NPS Vision and Strategy Document 2021–2025. The purpose of this document is to act as a starting point for discussion within the National Payments Department of the Central Bank of Eswatini. The validation of this document by the Central Bank of Eswatini will subsequently be shared with industry stakeholders to solicit comments and inputs on the strategic direction provided by Eswatini National Payment System Vision 2025:
NPS Vision and Strategy Document 2021–2025. The final document will be drafted and published based on this feedback. The current version of this document is therefore intended for internal discussion only and not for publication.

iv
List of abbreviations
A2A Agent to Agent
AML/CFT Anti-Money Laundering/Countering the Financing of Terrorism API Application Programming Interface ATM Automated Teller Machine BIS Bank of International Settlement B2B Business to Business B2G Business to Government B2P Business to Person BOP Balance of Payments CBDC Central Bank Digital Currency CBE Central Bank of Eswatini CBS Central Bank of Swaziland CCP Central Counterparty CDD Customer Due Diligence CENFRI Centre for Financial Regulation and Inclusion CICO Cash-In Cash-Out CPMI￾IOSCO Committee on Payments and Market Infrastructures-International Organisation of Securities Commissions CSD Central Securities Depository DFS Digital Financial Services ECH Eswatini Clearing House EFT Electronic Funds Transfer EPTC Eswatini Postal and Telecommunications Corporation ESCCOM Eswatini Communications Commission FATF Financial Action Task Force FIA Financial Institutions Act FIU Financial Intelligence Unit FMI Financial Market Infrastructure FSDIP Financial Sector Development Implementation Plan FSP Financial Service Provider FSRA Financial Services Regulatory Authority GDP Gross Domestic Product G2P Government to Person G2B Government to Business ICT Information and Communications Technology IMF International Monetary Fund KYC Know Your Customer MFI Microfinance Institution

v
ML/TF Money Laundering/Terrorist Financing
MNO Mobile Network Operator
MMA Mobile Money Agent
MMO Mobile Money Operator
MMSP Mobile Money Service Providers
MMT Mobile Money Transfer
MOF Ministry of Finance
MoMo Mobile Money
MSEPS Minimum Standards for Electronic Payment Schemes MSME Micro Small and Medium Enterprise NPS National Payment System NPSS National Payment and Settlement System NCSS National Clearing and Settlement Systems NFC Near-Field Communication NFIS National Financial Inclusion Strategy PFMI Principles for Financial Market Infrastructure POS Point of Sale P2B Person to Business P2P Person to Person OECD Organisation for Economic Co-Operation and Development QR Quick Response REPSS Regional Payment and Settlement System RSTP Royal Science and Technology Park RTGS Real-Time Gross Settlement SACCO Savings and Credit Co-Operatives SADC Southern African Development Community SAECH Swaziland Automated Electronic Clearing House SBA Small Business Administration SIPS Systemically Important Payment System SIRESS SADC Integrated Regional Electronic Settlement System SSS Securities Settlement System SWIPSS Swaziland Interbank Payment and Settlement System SZL Swaziland Lilangeni UNDP United Nations Development Programme UNCTAD United Nations Conference on Trade and Development USD United States Dollar USSD Unstructured Supplementary Service Data

Executive summary
Payment needs are rapidly evolving towards digitalisation in Eswatini. This is evident from the increasing popularity and use cases of mobile money to the rise of innovative payment mechanisms such as tap-and-go Near-Field Communication (NFC) technology and digital currencies. These trends reflect a growing demand among consumers and businesses alike for instantaneous, convenient and secure digital payment options that allow for near-real-time microtransactions to take place at a fraction of the cost. In the light of the COVID-19 pandemic, having access to more trusted digital payment options has been essential not only to meeting payment or consumption needs remotely, but also to financially including populations that would otherwise have been marginalised without access to brick-and-mortar institutions under the national lockdown period between March and May 2020. A revised and refreshed National Payment System strategy required for the digital age. The 2009–2016 National Payment System Strategy made significant inroads in developing key guidelines and regulations and initiating processes for a more efficient and reliable payment system. The focus of the 2021–2025 strategy is to create the key ecosystem enablers for a modern and frictionless payment system that not only meets today’s payment needs but is geared towards the future while mitigating new risks that may arise to threaten the stability of the financial sector. The purpose of this document is therefore to highlight key strategic imperatives for the advancement and modernisation of the NPS in Eswatini, with the objective of helping to guide the evolution of the NPS during the next five years under the direct supervision and leadership of the CBE. Key strategic imperatives and ecosystem enablers identified. Four broader categories of strategic imperative provide the blueprint for the NPS strategy. These categories comprise Payment System Digitalisation, Regulatory Payment Framework, Coordination, and Payment Innovation. Across these categories, seven high-level strategic imperatives have been identified based on current data trends and stakeholder information, as well as a number of CBE-endorsed key payment ecosystem development areas that, although they fall outside the direct mandate of the central bank, are critical levers for development by industry and relevant regulatory champions. Table 1 below outlines identified strategic imperatives as well as the associated action points per imperative. Table 2 specifies key ecosystem development areas endorsed by the CBE as well as their associated industry or regulatory champion.

Strategic imperatives Key actions
Payment System Digitalisation

1. Promote and strengthen the
   digitalisation of merchant P2B and
   B2B channels
   Expand the potential of e-money to digitalise merchant payments:

• Drive consumer-centric product design
• Tailor offerings to incentivise merchant adoption
• Promote interoperability for improved convenience
• Foster an enabling mobile digital ecosystem to
  support adoption of mobile payments such as expanding agent networks and broadening the digitisation of merchant value chains

2. Advance efforts towards
   interoperable, 24/7 and real-time payment functionality Develop enhanced payment architecture that is needs￾driven and fit-for-purpose:

• Leverage existing scale of payment infrastructure
• Explore fit-for-purpose solutions to meet Switch
  users’ expectations
• Encourage a collaborative approach between
  Switch project participants

3. Consolidate efforts and define a
   progressive strategy towards the phasing-out of cheques Define a consumer-centric approach to phasing out cheques, driven by:

• Existing consumer use cases
• Industry collaboration
• Mutually developed time dependencies
• Coordinated risk-based action plan
  Regulatory Payment Framework

4. Prioritise the development of a
   comprehensive and consistent regulatory framework Advance efforts to specify and clarify regulatory guidance for market participants through:

• Promulgating Bills under development
• Reviewing rules and procedures accordingly
• Issuing guidance to the industry

5. Drive the development of a more
   enabling cross-border remittance licensing regime Foster a more enabling regulatory framework to receive remittances:

• Conduct research to understand current provider
  barriers to apply for licensing
• Foster policy dialogue between industry and CBE
  to inform an enabling cross-border licensing regime
• Promote regional cooperation with key sending￾country hubs to support existing cross-border
  initiatives
  Coordination

Strategic imperatives Key actions
6. Strengthen mechanisms for
coordination between the CBE and other financial regulators and industry stakeholders Proactively deepen cross-sectoral and intra-regulatory coordination:

• Expand the mandate and membership of existing
  forums
• Formalise binding coordination mechanisms
• Deepen dialogue with industry
  Payment innovation

7. Define a formal regulation for an
   innovation framework that supports more proactive communication and coordination Develop a framework to regulate innovation that places communication and industry needs at its centre:

• Revisiting and broadening the sandbox approach
• Promoting more inclusive communication with
  innovators and new entrants
  Table 1: 2020–2025 NPS strategic imperatives
  Endorsed key ecosystem development areas Endorsed champion(s) Payment System Digitalisation:
• Advance and complement existing payment
  gateway initiatives with industry actions to support and fast-track gains, including:
• Initiating processes to open private
  Application Programming Interfaces
  (APIs)
• Upgrading messaging systems to
  support payment aggregation
• Coordination of amendments to the ECH and
  SWIPSS rules in line with new regulation, including:
• Addressing ECH governance gaps to
  promote equal access and participation for new non-bank entrants
• Amending SWIPSS rules and
  procedures to include external arbiter to ensure fair governance -
• Coordination of public and private efforts to
  strengthen the ICT ecosystem, by:
• RSTP
• MNOs
• Commercial banks
• ECH Bankers Committee
• Electronic Clearing House Management
  Committee
• CBE Oversight unit
• ESCCOM
• MNOs

Endorsed key ecosystem development areas Endorsed champion(s)

• Strengthening regulatory dialogue
  between relevant supervisors
• Leveraging existing local or regional ICT
  for enhanced connectivity
• Fostering industry innovation
• Explore the potential to develop a Digital ID utility
  under the new eGovernment strategy
• Development of a coordinated and systemic
  approach to advancing the digitalisation of government payments, by:
• Fostering an enabling environment
• Working with FSPs to incentivize digitalisation
• Leveraging public–private partnerships
  Regulatory Payment Framework:
• Remove ambiguity in regulation for a full
  transition to a risk-based approach, by:
• Issuing guidance on the risk-based approach
• Increasing communication and capacity￾building for effective implementation
• Adjust regulation to accommodate digital identity
  proofing system, including:
• Issuing guidance on ID proxies and KYC
  innovation to manage known and unknown risks
• Simplify and streamline Balance of Payment
  (BoP) transaction codes
• Commercial bank associations
• Office of the Prime Minister
• Office of the Prime Minister
• Ministry of Finance and other government
  agencies
• Commercial banks
• MNOs
• Ministry of Finance
• National Task Force on AML/CFT
• CBE
• FSRA
• Office of the Prime Minister
• Ministry of Finance
• FIU
• Ministry of Finance
• Ministry of Trade and Industry
  Table 2: CBE endorsements of key ecosystem development areas

A data-driven and participatory approach for a fit-for-purpose strategy. The development of the 2020–2025 National Payment System strategy incorporates three types of analysis. These analyses include 1) data analysis of key national payment statistics and trends sourced from the CBE and industry players; 2) in-depth remote stakeholder engagement, ranging from government agencies, financial and non-financial regulators and CBE departments to market participants such as commercial banks and mobile money operators; and 3) a national policy and regulatory analysis that locates the strategic imperatives of the NPS in international payment standards and key national policy objectives.

1. Introduction
   A National Payment System (NPS) encompasses all payment-related activities, processes, mechanisms/infrastructure, institutions and users in the economy. This includes clearing, switching and settlement architecture and services, the operations of bank and non-bank payment system participants (including payment service providers, system operators and switches), as well as the legal frameworks and regulatory oversight governing such systems and operators. The Eswatini national payment system currently consists of two major and systemic payment system infrastructures: (i) the Swaziland Interbank and Settlement System (SWIPSS), which provides real￾time gross settlement (RTGS) for high-value critical payments, and (ii) the Eswatini Clearing House (ECH), which processes interbank retail payments. SWIPSS is owned, managed and located in the Central Bank of Eswatini (CBE) and directly serves the Ministry of Finance through the Treasury Department and the four commercial banks in Eswatini, i.e. First National Bank, Standard Bank, Nedbank and Eswatini Bank. ECH sits outside of the CBE but also serves the four major commercial banks. The ECH is owned by the commercial banks and the CBE in equal proportions (Government of Eswatini, 2017). Other payment system participants include Mobile Money Operators (MMOs) and Money Transfer Operators (MTOs). In 2009, the Central Bank of Eswatini (CBE) NPS department, in consultation with JY Consulting (Pty) Ltd, published the Swaziland National Payment System Vision for the period 2009–2016 (“Vision 2016”). Its primary aim was to develop “strategic objectives [that] take account of the growing sophistication and needs of the people of Swaziland and provide financial systems, mechanisms and instruments to cater for these changes” (CBE, 2009). 2009 to now: How far have we come? Significant progress. The strategic objectives identified by Vision 2016 related to six strategically and systemically important focus areas essential to the modernisation and stability of the national payment system (NPS): NPS Regulatory Oversight; Access to the NPS; Global Standards and Interoperability, Information; Communication; Technology Developments and Standards; Domestic and Cross-border Remittances; and Cross Border Developments for Regional and International Payments. Since 2009, significant progress has been made by the CBE (or “the Bank”) towards achieving these objectives. The most notable among these achievements include, but are not limited to:

• The publication of Minimum Standards for Electronic Payment Schemes (MSEPS) in September
  2010, enabling viable digital alternatives to cash while providing suitable risk-mitigated electronic payment options for those with no or limited access to financial services.

• Approval of the MTN Mobile Money Transfer Service licence in 2010.

• The promulgation of the National Clearing and Settlement Systems (NCSS) Act 2011.
  1 The Vision 2016 outlines the key focus areas for the NPS as: national issues (economic and foreign direct investment); monitoring and management of the payments system; roles and structures (central banks; banks; operators and other stakeholders); legal frameworks and regulatory oversight models; financial risk and settlement management; payment system architectures (settlement; switching and clearing); NPS operators (providing clearing; switching and settlement services); non-bank participants (including, but not limited to, beneficiary service providers; payment service providers; system operators; switches).

• The revision and publication of the ECH rules and procedures in April 2011 to enable clearing￾house participants to better understand the operations and functionalities of the ECH system.

• The publication of a revised NPS Regulatory Oversight Framework in 2019 defining the Bank’s
  oversight objectives and scope, the organisational arrangements for oversight, and the activities, instruments and tools used for oversight regarding the NPS.

• The release of the March 2019 Practice Note for Mobile Money Service Providers applicable to
  domestic and cross-border Mobile Money Service Providers (MMSP) that are licensed and/or authorised by the Central Bank of Eswatini.

• The publication of the CBE Agent Banking Guidelines (No. 1 of 2019) aimed at providing a
  framework for agency banking in the Kingdom of Eswatini, including the minimum criteria to be observed by banking institutions and those entities that they contract with.

• Initiation of the CBE National Payments Switch Project in April 2020.
  Why an NPS strategy refresh?
  Evolving needs, building on past successes. Despite the significant progress made under the 2016 Vision, the evolving needs of consumers and business for a safe, modern, efficient and reliable payment ecosystem require an updated strategic vision for the Eswatini payments system. It is for this reason that the CBE presents a revised NPS Vision and strategy document for the period of 2021 to 2025. The purpose of this framework is to highlight key strategic imperatives for the advancement and modernisation of the NPS in Eswatini. The objective of these strategic imperatives is to help guide the evolution of the NPS during the next five years under the direct supervision and leadership of the CBE. Accordingly, this document proposes strategic imperatives that, while building upon past objectives and outcomes, are inherently forward-looking and fit-for-purpose. COVID-19 provides additional impetus for a strategy refresh. On 13 March 2020, Eswatini confirmed its first case of COVID-19 (Eswatini Observer, 2020)2 . Since then the lives of Eswatini consumers and the economy have been radically altered. The need for contactless digital payment channels to curb the spread of the pandemic, and for remote digital payments in particular, provided one of the largest impetuses in recent history for Eswatini to move towards a cash-lite society and NPS. This move towards digitalised payments was reinforced in the June 2020 annual Monetary Policy statement by CBE Governor Sithole, encouraging banks to “promote the use of digital delivery channels and consider waiving some of the fees and charges related to electronic transactions” (CBE, 2020). In support of this drive towards a broader uptake of digital payments, the revision of the NPS Strategy and Vision document will thus aim to promote payment innovation amid current COVID-19 realities, as well as encourage wider payment ecosystem modernisation for improved economic and social recovery marked by deeper and broader participation. NPS Strategy Revision Approach An applied participatory and market systems approach. To assist with the revision of the NPS Strategy and Vision, the CBE requested Cenfri to analyse the payment landscape in Eswatini, identify strategic priorities, and develop and draft the 2021–2025 Vision under the leadership of the CBE NPS department. A participatory and market systems approach was followed:
  2 In early March 2020, the World Health Organization declared the spread of the Novel Coronavirus (COVID-19) a global pandemic (Ducharme, 2020).

NPS objectives located within national policy and international standards. The point of departure was to consider existing national policy objectives and relevant international guidelines on payment systems. These acted as the primary lens through which the current status and progress of the NPS landscape in Eswatini is understood:

• National policies considered include the national goals outlined in the 2017 Financial Sector
  Development Plan, the 2017–2022 National Financial Inclusion Strategy for Eswatini, and the 2013–2017 e-Government Strategy. Strategic priorities from the Ministry of Finance regarding the financial sector and those from the NPS department in the CBE were also taken into account.
• The Bank for International Settlements (BIS) Committee on Payment and Settlement Systems
  and the Technical Committee of the International Organization of Securities Commission (CPMI￾IOSCO) Principles for Financial Market Infrastructure (PFMI) provide the primary international benchmark against which to assess the status of the NPS in relation to its management of risk and governance of systemically important payment systems (SIPS).
• In-depth stakeholder engagement. Next, comprehensive stakeholder engagement was
  conducted to gather feedback on strategic payment priorities for the period 2020 to 2025. Twenty-seven institutions were each interviewed individually between May and July 2020. 3 The range of stakeholders interviewed included commercial banks, financial sector regulators, CBE departments, Government agencies, including the Ministry of Finance, payment infrastructure providers, as well as non-bank entities such as MMOs and fintech hubs. Contextualising insights through market system analysis. Inputs from stakeholder engagements were coupled with a rigorous analysis of current payment trends across Eswatini. This analysis considered trends in the access, uptake and usage of payment infrastructure, instruments and channels, drawing on aggregated datasets from the CBE, FinScope 2018 and aggregated transactional datasets from the ECH. In addition, a high-level analysis of existing payment regulation was conducted to understand the payment regulatory context and to identify regulatory gaps that may impede the efficiency and innovation of the Eswatini payment system. The 2021–2025 NPS Strategy and Vision was then drafted through synthesising key take-aways from these investigations together with ongoing consultation with the CBE to identify strategic objectives and corresponding strategies. This final document is based on feedback received from the industry on the initial draft report circulated for comments between 3 and 18 December 2020. Report structure. Based on the above approach, Section 2 outlines the national policy context for Eswatini as it pertains to the NPS. Section 3 details the legal oversight and governance of NPS in Eswatini. Section 4 provides a brief analysis of current payment trends in Eswatini complemented by stakeholder insights into emerging developments. Section 5 conducts a diagnostic analysis of the NPS according to the BIS PFMI and, on this basis, outlines strategic objectives for the Eswatini NPS. The paper concludes with an overview of forward-looking strategic recommendations based on identified objectives in Section 6. 3 Owing to travel restrictions imposed as a result of the COVID-19 pandemic, these interviews were conducted telephonically. 4 See annexure Table 10 for the full list of interviewed stakeholders.

2. Policy context
   The existing financial sector development and financial inclusion policy environment in Eswatini provides a clear lens through which to contextualise and evaluate the performance of the NPS, as well as to align its strategic objectives. This section outlines key national strategic policies in Eswatini with a focus on understanding their objectives, strategic priorities and relevance to the payment system, such that synergies across policy strategies can be identified and pursued. Financial Sector Development Implementation Plan (FSDIP) 2017 Background. The Financial Sector Development Implementation Plan (FSDIP) was created in March 2017 by the Government of Eswatini with technical assistance provided by the World Bank Group. The ultimate objective of the FSDIP is to provide a “comprehensive and progressive vision for the financial sector that will underpin economic growth and poverty reduction” (Government of Eswatini, 2017). This implies a financial sector that can efficiently mobilise economic resources for productive investments that meet individual and business goals, facilitate the availability of affordable credit and liquidity management strategies for enhanced financial security, and ensure that poor and financially vulnerable families are able to benefit from affordable and secure savings, credit, payment and insurance services. Objectives. FSDIP outlines four main objectives or pillars, namely:
3. Ensure the Stability of the Financial System
4. Diversify the Financial System and its Resources
5. Modernise the Financial Sector
6. Broaden Financial Inclusion
   Relevance to the Eswatini payment system. The FSDIP gap analysis outlines a number of core pain points and respective strategies that directly affect the supply of “modern and well-priced payment solutions to more consumers” (Government of Eswatini, 2017). These pain points include a lack of payment system interoperability, the absence of a regulatory framework to govern the operations and oversight of money transfer operators (MTOs), the inadequacy of the NCSS Act (2011) regarding defining finality, settlement and CBE powers, cheque truncation, non-bank depository institutions’ direct access to the payment system and the facilitation of new electronic systems, a lack of cross-border mobile money services to complement remittances, and the limited access of non-banks. National Financial Inclusion Strategy (NFIS) 2017–2022 Background. The National Financial Inclusion Strategy (NFIS), prepared by the Ministry of Finance, represents the overarching national strategy aimed at improving the accessibility and usage of financial services in Eswatini. The objective of the NFIS aligns with that of the FSDIP, namely to “create a stable, diversified, modern, and competitive financial system that provides quality, affordable and accessible financial services to all to support economic growth” (Government of Eswatini, 2017). Towards this end, the NFIS seeks to achieve the proposed goal to: “Increase the depth of Financial Inclusion, growing the percent of adults with access to two or more formal

products from 43% to 75%, and reducing the excluded from 27% to 15%, by 2022 by growing mobile money and remittances, deepening bank reach, getting credit basics right, ensuring risk management products are available, and enabling alternative channels to serve the poor” (Ministry of Finance, 2017). Relevance to the Eswatini payment system. The NFIS outlines a number of specific strategies that directly relate to the NPS of Eswatini. These include:

• Enablement of the convergence between Mobile Money and banks’ ATMs and internet transfers
• Linking financial co-operatives and MFIs to the National Payments System
• Promotion of interoperability among the banks and affordable charges
• Promotion of financial services and products through mobile phone
• Expanding access to ATMs
• Supporting the graduation to peer-to-business (P2B), peer-to-government (P2G), business-to￾person (B2P) and government-to-person (G2P) through mobile money
• Enabling convergence between mobile money and the banking infrastructure
  e-Government Strategy for Eswatini: 2013–2017
  Background and current progress. The 2013–2017 e-Government Strategy for Eswatini was published in 2013 by the Office of the Prime Minister with technical assistance provided by the Commonwealth Secretariat. Its strategic vision aimed “to pave the way for economic growth and raise, through meeting of the Millennium Development Goals, the quality of life of the people of Swaziland to the highest attainable levels by leveraging electronic and mobile government to transform the civil service to become a catalyst of national change” (Government of the Kingdom of Eswatini, 2013). Following its completion in 2017, a revised and updated e-Government strategy is currently being developed with technical assistance provided by the United Nations Development Programme (UNDP). Three areas of priority for the revised strategy, as highlighted by the Office of the Prime Minister, will include i) the digitisation and harmonisation of Government identification systems as well as identification proxies; ii) greater promotion of digital B2G services and functionalities to improve the ease of doing business in Eswatini, and iii) encouraging the digitisation of P2G and G2P relative to cash and other paper-based payment instruments, with the potential introduction of mobile money as an instrument for P2G and G2P transactions (Stakeholder interviews, 2020). In summary, the financial sector policy environment in Eswatini places the financial needs of citizens and businesses, especially those from lower-income segments previously financially excluded or underserved, at its centre. The modernisation of financial products, processes and services, and the use of technology to deliver those services, are identified as key enablers for unlocking broader access and deepening the use of financial services. In this light, the role of the NPS is to continuously evolve to cater for the changing needs of market participants by supporting innovation that enhances the speed, affordability, convenience, security and reliability of all payment channels in Eswatini without jeopardising the stability of the broader financial system. It is therefore essential that the 2021–2025 NPS Strategy uphold this role and aim to support convergence with overarching national policy objectives for financial inclusion and financial sector development.

3. Eswatini NPS governance
   and objectives
   Understanding the role and priorities vis-à-vis the NPS of the primary regulators, supervisors and key policy-makers is key to understanding the direction and scope of the revised 2021–2025 NPS Strategy framework. Ministry of Finance (MoF) and the NPS MoF vision and objectives. The vision or mission statement of the MoF is “to promote macroeconomic stability in Eswatini by formulating and implementing fiscal and financial policies that optimize economic growth and improve the welfare of its citizens” (Government of the Kingdom of Eswatini, 2020). Its primary objectives towards meeting this vision include providing a sound regulatory framework for the country’s financial sector. In relation to the Eswatini NPS, this objective refers to the advancement of a cost-effective and reliable payment system that is well-functioning, ensures financial inclusion and promotes public trust in the national currency (Stakeholder interview, 2020). NPS strategic priorities. As the primary policy-maker for the Eswatini financial sector, the MoF considers the NPS to be a critical lever to promote financial sector development and financial inclusion in the country (Stakeholder interview, 2020). Priorities considered most critical by the MoF for the evolution and advancement of a modern and inclusive NPS include:

• The promotion of a cash-lite economy driven by greater uptake and use of digital payments.
• Enhancing financial inclusion through inclusive payment systems that encourage affordable,
  reliable and convenient payment channels, instruments and schemes.
• Greater promotion of mobile money as an increasingly pervasive tool for digital payments and
  financial inclusion.
• Expansion of NPS accessibility to non-banks (in addition to commercial banks), including fair
  system access and participation.
  Central Bank of Eswatini and the NPS
  The legal NPS role and mandate of the CBE. The mandate of the CBE, as per the Central Bank of Swaziland (CBS) Order (1974) (as amended), is to “foster price and financial stability that is conducive to the economic development of Eswatini” (CBS Order, 1974). The involvement of the CBE in the NPS falls in line with its function, as stipulated in the CBS Order 1974, part II, section 4, to facilitate the development and operation of the NPS, in addition to issuing currency, regulating and supervising the financial sector and implementing a sound monetary policy. The primary objective of the CBE with respect to the NPS under this mandate is therefore to “ensure that payment systems are secure, reliable and cost effective to meet the needs of the Eswatini economy” (CBE, 2020). CBE and NPS oversight. The CBS Order (1974), together with the NCSS Act (2011) and the NPS Act (proposed), provide the legal foundations for granting the CBE the mandate to exercise

regulatory and oversight powers over the NPS in Eswatini. The objective of this oversight is to “ensure the national payment system operates safely and efficiently,” as outlined in the 2019 National Payment and Settlement Systems Oversight Policy Framework (CBE, 2019). The oversight functions of the CBE include ensuring that the NPS:

• Operates smoothly, efficiently, fairly and transparently for all participants and users.
• Is robust against the risk of transmitting shocks through the economy consequently upon an
  individual participant’s failure to meet its payment obligations.
• Continues to operate even in the event of major disruptions to systems or providers.
• Continually evolves and achieves the level of technological and institutional development
  necessary to satisfy the payment needs of a growing, open, regional and internationally integrated economy (CBE, 2019). Payment participants governed by the CBE. The CBE has the mandate to “oversee the financial market infrastructures which given their systemic importance and interconnectedness could more easily transmit shocks from one participant and from one system to another” (CBE, 2019). Channels for the provision of retail payment services that are identified as relevant to protect public confidence in the currency and the monetary system of the country are additionally included in this mandate (CBE, 2019). The oversight powers of the CBE therefore extend to the following entities and systems:
• Systemically important payment systems, such as the SWIPSS, and the ECH
• Central Securities Depository (CSD) and Securities Settlement Systems (SSS)
• Regional (foreign currency) settlement systems, e.g. SADC-RTGS, COMESA-REPSS
• Retail payment instruments and schemes, such as cheques, electronic cards and cellphone
  banking
• Providers of critical services, such as the mobile network service provider(s) which are
  categorised as SIPS
• Cross-border retail payment instruments, including remittances
• Bank as well as non-bank financial institutions (CBE, 2019).
  The NPS as a national utility. The CBE aims to foster an NPS and payment ecosystem that encourages market competition and a level playing field regarding access and fair participation among market participants (Stakeholder interview, 2020). This position is underscored by both Vision 2016, which identifies the functioning of NPS Operators as a “National Utility” as a strategic objective, and the 2019 NPS oversight framework through its stipulation of the CBE role as a “catalyst in the development of the national payment system. Its actions will be transparent, credible and supportive of a level playing field in the delivery of payment services” (CBE, 2019). In terms of payment infrastructure, the CBE promotes market collaboration such that economies of scale can be reaped, and such that citizens and businesses can benefit from affordable payment services (Stakeholder interview, 2020). The CBE applies this approach by “determining and communicating overall objectives and leaving it up to market players to decide how to achieve them. The Bank will at regular intervals organize discussions between the market players in order to define the best solutions” (CBE, 2019).

4. Payment trends in Eswatini
   This chapter describes the payment trends that have taken place in Eswatini over the past five years, to inform the design of a national payment strategy framework that will enable the development of the most widely adopted payment methods and channels. First, the chapter investigates how accessible financial service access points are in Eswatini. Then it analyses the uptake evolution of the different payment instruments and channels, followed by an analysis of the usage trends of payment instruments and channels. In closing, the chapter evaluates the main trends in cross￾border payments in Eswatini.
   4.1. Access to payments
   Access refers to when a “consumer has sufficient physical proximity to access points—including branches, agents, automated teller machines (ATMs), and other outlets or devices—to enable him or her to easily select and use a range of financial products and services” (World Bank Group and People's Bank of China, 2018). Remote access channels such as mobile phones and personal computers are viewed as complements to the traditional access points. The objective of this section is to understand the trends in access to payments, considering the distribution of POS devices, ATMs, retailer agents, bank branches, bank agents and mobile money agents in Eswatini. Table 3 outlines the evolution of these access points over the past five years:
   Year POS
   ATM’s
   (excluding Building
   Society network)
   Retailer agents
   Banking branches*
   (of which, number of agents)
   Mobile money agents (Active)
   2015 1,704 255 8 61 (unknown) 814
   2016 2,958 251 9 65 (unknown) 2,033
   2017 3,101 246 15 66 (28) 3,539
   2018 2,921 286 15 67 (28) 6,681
   2019 3,186 296 16 83 (42) 9,269 (5,649)
   Table 3: Distribution of financial access points in Eswatini (2015–2019)
   Source: Central Bank of Eswatini (2020)
   *Number of bank branches inclusive of agents
   As at March 2020
   Increase across the board. On aggregate there has been a substantial increase in the number of financial service access points across all channels, making it more convenient thereby improving the ability and convenience for customers to access financial services in Eswatini. Bank expansion through agents. Table 3 shows that the banking network has expanded by 24% since 2015, with most of this growth happening in 2019 on the back of an expansion in bank agents. As at 2019, bank agents represent one-third of all bank outlets. However, the number of bank agents

remains very low when compared to mobile money agents. The normally slow growth rate in branches depicted in Table 3 is expected to persist, as banks’ strategy for the next five years will not focus on expanding brick-and-mortar outlets, given the high investment cost they represent (Stakeholder engagements, 2020). POS growth stagnated, but ambitious plans ahead. Table 3 indicates that the number of POS devices experienced its highest growth in 2016, where there was a 74% annual increase in POS devices. However, this was followed by a period of stagnation. Stakeholder engagements suggest that, despite this sluggish trend, the expansion of POS devices is likely to boom as the development of card rails is a priority for commercial banks. This trend would contribute to the digitalisation of merchant payments, namely P2B and B2B payments (Stakeholder engagements, 2020). However, the distribution strategy for merchant POS devices seems to prioritise urban areas, where bank customers concentrate, leaving rural areas underserved (Stakeholder engagements, 2020) High operational costs hampering ATM network coverage. Regarding ATMs, the network has increased by 16% over the past five years. In addition to the banks’ networks, the Building Society has also developed its own ATM network, with 64 ATMs spread across the country (Swazi Building Society, n.d.). 5 According to the stakeholder consultations, the slow growth is mostly due to the high costs of deploying ATMs. Most stakeholders confirmed that their strategy for the next five years would not include significantly expanding their ATM networks (Stakeholder engagement, 2020). It is also important to note that, while bank ATMs are interoperable, interoperability between banks and MMOs as well as between banks and the Building Society is limited and based on bilateral agreements. Mobile money agents currently the most accessible access point. The number of MMAs has grown by 1,038% over the past five years. As at 2019, there were approximately 19 times more MMAs than bank outlets and ATMs (branches, bank agents and ATMs combined).
Figure 1: Proportion of population residing within 30 minutes of various financial access points
(2014/2018)
Source: FinScope Eswatini (2014); FinScope Eswatini (2018) 5 The numbers are based on those indicated on Swazi Building Society’s website:
https://www.sbs.co.sz/index.php/about-us/atm-locations (Accessed 07/07/2020).

Banks accessible to half of the population. Figure 1 shows the percentage of the population who live within 30 minutes of an access point providing payment services. This allows for comparison of the accessibility of the different channels. The figure indicates that ATMs and bank branches6 are accessible to approximately half of the population and that their reach has increased only slightly in the four-year period under consideration. Their geographic coverage focuses on urban areas, which explains why the majority of the rural population would live too far from a bank branch or ATM (Stakeholder engagement, 2020). Mobile money agents possess significant footprint. According to Figure 1, mobile money’s reach has grown substantially and in a very short period since its emergence in Eswatini. Most of the population (84%) currently live within a 30-minute radius of a mobile money outlet, with a coverage rate not far behind everyday outlets such as grocery stores (88%). The current mobile money coverage also shows the business case limitations, even for MMAs, to reach the most isolated rural population.
4.2. Uptake of payments
The uptake of financial services refers specifically to “the percentage of adults who have individual or joint ownership of a formal account, defined as an account at a formal financial institution such as a bank, credit union, saving cooperative, post office, or microfinance institution” (Demirgüç-Kunt & Klapper , 2013, p. 284). Eswatini also considers mobile money accounts, as they play a significant role in facilitating the penetration of digital payments. This section describes the evolution in the uptake of payment instruments and channels in Eswatini over the past five years, with a focus on bank accounts, card ownership and mobile money accounts. It begins by evaluating the progress in account ownership, as well as by identifying the main institutions driving uptake in Eswatini. This is followed by a more granular analysis to look at the trends in uptake across payment instruments and channels.
Figure 2: Financial Access strands (2014 and 2018)
Source: FinScope Eswatini (2014); FinScope Eswatini (2018) 6 Bank branches do not include bank agents.

Overall uptake has improved substantially over the past five years. As Figure 2 shows, the proportion of the population that remains financially excluded has shrunk considerably (–14%), and so has the percentage of people who only used informal financial services (–7%). One of the main drivers of financial inclusion has been the uptake of non-bank financial services, namely mobile money, which increased penetration for the adult population by 23% in five years. In the same period, the percentage of the population who use banks remained mostly unchanged.
Figure 3: Number of depositors with commercial banks (2014–2018)
Source: Financial Access Survey, IMF (2018)
Commercial banks still a vital player. Figure 3 shows that the number of bank accounts has remained mostly stable, representing a penetration of 46% of the population aged 15 and above in Eswatini, in 2018. 7 This indicates that commercial banks have maintained a similar client base over the past five years and will probably continue to be strong players in the Eswatini payments sector.
Figure 4: Number of cards 2015–2018
Source: Central Bank of Eswatini (2018)
7 United Nations, Department of Economic and Social Affairs, Population Division (2019). World Population Prospects 2019, Online Edition. Rev. 1 (based on 2020 estimates).

Surge in card adoption. Figure 4: Number of cards 2015–2018 shows that from 2014 to 2018, the number of cards more than doubled in Eswatini. This growth seems to be explained, in part, by the fact that debit cards are issued automatically upon opening a bank account (Stakeholder engagement, 2020). In 2018, there were 154 cards per 100 adults, indicating that some people have multiple cards (while others have none). The overall card uptake figures indicate the maturity of the card industry in Eswatini in terms of reaching ubiquity among banked customers. The number of cards is also expected to continue rising as most banks indicate that their card business is a core component in their strategies and plans (Stakeholder engagements, 2020).
Figure 5: Mobile money subscriptions 2015–2019
Source: Central Bank of Eswatini, (2019)
Mobile money steadily becoming a ubiquitous payment instrument. Figure 5: Mobile money subscriptions 2015–2019 describes the growth in mobile money subscriptions during the 2015 to 2019 period. A 124% increase in the adoption of mobile money illustrates that the proliferation of mobile money accounts over the past five years has been expeditious. Essentially, e-money has become ubiquitous among the adult population. The stakeholder consultations suggest that, once outreach had been achieved, the focus of MMOs has pivoted towards product sophistication and extending their outreach to businesses, with P2B as a next priority (Stakeholder engagement, 2020).
Figure 6: Mobile cellular subscriptions9
in Eswatini per 100 inhabitants (2014–2017)
Source: International Telecommunications Union (2018). Mobile cellular subscriptions10 8 Refers to all residents of Eswatini 15 years and older. Population data from United Nations, Department of Economic and Social Affairs, Population Division (2019). World Population Prospects 2019, Online Edition. Rev. 1 (based on 2020 estimates). 9 Refers to the subscriptions to a public mobile telephone service and provides access to Public Switched Telephone Network (PSTN) using cellular technology, including number of pre-paid SIM cards active during the past three months. 10 Available at: https://www.itu.int/en/ITU-D/Statistics/Documents/statistics/2019/Mobile_cellular_2000-2018_Dec2019.xls

Mobile phones a promising channel. Figure 6 illustrates that mobile cellular subscriptions are almost ubiquitous in Eswatini. In parallel to high sim card registrations, 88%11 of the adult population confirms that they own a mobile phone in Eswatini. 12 Mobile devices are an increasingly popular channel for consumers, especially for those who experience constraints to access other service points and are becoming particularly relevant to payments. Eswatini customers with mobile phones can make cardless withdrawals on ATMs as well as engage in remote digital transfers (P2P, P2B, etc.).
Figure 7: Online/app banking and mobile/cellphone banking (USSD), 201813
Source: Central Bank of Eswatini (2018) *cellphone banking refers to USSD-based banking on cellphones USSD a prime method for remote payments through banks. Figure 7 provides a snapshot of the number of customers who engage with their bank account or bank e-wallet either via USSD or online/app banking1415. The figure illustrates that USSD-based cellphone banking was a more popular method for making payments relative to app/online banking (66% of all digital access). Stakeholder insights indicate that the use of USSD is linked to a significant number of people still having feature phones (Stakeholder engagement, 2020). In addition, access to reliable internet connections may affect the attractiveness of online/app banking, even for those with smartphones (Stakeholder engagement, 2020). The overall uptake figures are indicative of a keen interest in electronic payments by customers in Eswatini. This gap would be even greater for mobile money transactions, where USSD is still pervasive as compared to mobile money apps (Stakeholder engagements, 2020).
4.3. Usage of payment instruments and channels
The usage of financial services can be defined as, “the act of employing or utilizing a financial service” (Centre for Financial Inclusion, n.d). Thus, an analysis of usage considers how a person engages with the financial services that they have. This section starts by providing an overview of the preferred payment means for different “use cases” (reasons why customers make use of these 11 596,814 adults. 12 FinScope, 2018. 13 Data is presented as at Q3 2018, owing to the availability and consistency of data. 14 Quarter 3 of 2018 is selected based on data availability and data quality. 15 As a result, the uptake numbers in Figure 7 should not be compared to the number of commercial bank customers in
Figure 3.

payments in Eswatini). Then it evaluates wholesale and retail payments usage in Eswatini by considering the aggregate usage of the Swaziland Interbank Payment and Settlement System (SWIPSS) and Eswatini Clearing House (ECH), respectively. The analysis covers cheques, credit and debit EFT payments, as well as other instruments not cleared through ECH; such as e-money. The section concludes with an analysis of the volumes and values conducted on ATMs and POS devices.
4.3.1. Use cases
Figure 8 outlines the usage of different payment methods by use case:
Figure 8: Use of payment methods (% of payers) by use case
Source: FinScope Eswatini (2018)
Remittances, the only digitised payment use case. Figure 8 illustrates that in 2018, 91% of remittance payments were sent digitally, of which the vast majority (82%) were sent through mobile money. Other less popular methods used to remit were banking/mobile phone transfer (7%), self-delivery (4%), e￾wallet/Instant Money (3%) and family and friends (2%). While mobile money is also the preferred choice for remittance receivers (see Figure 23 in the annex), they cannot leverage the wide geographic distribution of MMAs to collect cross-border remittances, as MMO’s currently are not licensed to participate in the cross-border remittance space. P2B still cash-based. In 2018, over 90% of groceries, utilities, educational expenses, transport, airtime expenses and all farming inputs were paid for in cash (Figure 8). This suggests that merchant payments are not yet digitised in Eswatini, which contrasts with the high number of cards in circulation in the country. This may indicate that merchants require more incentives to adopt POS devices, as well as a cash preference for consumers. As the high usage of cash for utilities payments in Figure 8 shows, the bill payments ecosystem is also a key area with much untapped potential for digitalisation. Stakeholders consulted suggest that one of the main barriers to bill payments being digitised is the lack of payment aggregators. This forces payment service providers to integrate on a one-to-one basis with each company that they become an agent for (Stakeholder engagement, 2020).

Figure 9: Method of receiving state monies
Source: FinScope Eswatini (2018)
Government transfers yet to be digitalised. According to FinScope, 64% of grant recipients possessed a financial account in 2018. However, when asked how they receive their transfers, only 12% reported using a bank account (see Figure 9). This suggests that while consumers may be ready to receive grants electronically, the government is not yet making all payments electronically. Stakeholders report that progress has been made, though. Most government employees are now paid into their bank accounts, and during COVID-19 the government partnered with MTN to distribute social grants through MTN’s MMA network (FinMark Trust, 2020). However, most payments by the government revenue offices continue to be made in cash (Stakeholder engagement, 2020). P2G payments yet to be digitised. P2G payments, like G2P, are also cash-based, with roughly 80– 90% of government services of P2G being cash payments. Despite this low rate, there are plans to digitise P2G payments under the new e-Government strategy under development (Stakeholder engagement, 2020). EFT to government vendors a work in progress. To pay suppliers, the Government is now making use of EFTs rather than cheques. This represents significant progress. However, the lack of a bank account by smaller or rural SMEs continues to be raised as a reason for cheque-based G2B payments (Stakeholder engagement, 2020).
4.3.2. SWIPSS utilisation
Figure 10: SWIPSS utilisation volumes and values (2014–2018)
Source: Central Bank of Eswatini (2018)

SWIPSS, a growing wholesale payments system in Eswatini. Figure 10 indicates that there was a significant increase in the volumes (79%) and values (71%) of SWIPSS transactions between 2014 and 2018. During the same period, the average transaction value declined by 5%, fluctuating both upwards and downwards and standing at SZL 3,961,813 in 2018. Overall, the wholesale payments system has experienced a greater level of utilisation over the past five years. The lower average value per transaction suggests that SWIPSS has not necessarily increased its systemic risk.
Figure 11: Utilisation of RTGS (transaction value/GDP) (2015–2018)
Source: Central Bank of Eswatini (2018), Central Bank of Namibia (2018), Central Bank of Mauritius (2018), Central Bank of Lesotho (2018) SWIPSS utilisation remains low relative to other SADC countries. As a proportion of GDP, the values currently processed through SWIPSS remains between 200% and 300% of GDP. SWIPSS has a low utilisation rate in Eswatini relative to similar-sized SADC countries such as Mauritius and Namibia (Figure 11).
4.3.3. Retail payment instrument: ECH utilisation
Figure 12: ECH volumes per instrument (2014–2018)
Source: Central Bank of Eswatini (2018)

Figure 13: ECH values per instrument (2014–2018)
Source: Central Bank of Eswatini (2018)
ECH utilisation driven up by credit EFTs as cheques continue declining. The ECH facility clears cheques, EFT debits and EFT credits and sends a batch file to SWIPSS for final settlement. Figure 12 and Figure 13: ECH values per instrument (2014–2018) demonstrate that there has been significant variability in the transaction volumes and values processed through ECH over the past five years, with a slight increase of 8.5% and 7% in the transaction volumes and values, respectively. During the same period, the average transaction values have declined slightly, by 2%, with significant fluctuations upwards and downwards and standing at SZL 11,881 in 2018. 16 This indicates that the ECH has not taken on more risk. Ultimately, the increase in volumes and values, particularly in EFT credit transactions, is indicative of a growing retail payment system in Eswatini. A declining demand for cheques. Cheque volumes and values declined steadily by 45% and 63%, respectively, during the 2014 to 2018 period (Figure 12 and Figure 13: ECH values per instrument (2014–2018)). This may be explained by a lower demand, coupled with specific CBE measures. To encourage the movement away from cheques and limit the risk they pose to the system, CBE in 2015 reduced the upper cheque limit from E500,000 (in place since 2012) to E100,000. 17 In fact, this measure may be behind the sharper decline in cheque values as compared to volumes, which may suggest that cheque users may have been forced to use multiple lower-value cheques. EFT debits still very low, but showing some growth. Figure 12 illustrates that EFT debits have increased over the past five years, particularly by volume (+28%). 18 However, their share of total payments processed by the ECH remains low, both in volume and in value. Stakeholders consulted also suggest that MMOs and some commercial banks can process bill payments on their digital wallets, which implies that alternative methods are being used by the Eswatini population that may not rely on the ECH (Stakeholder engagement, 2020). EFT credits on the rise. EFT credits are a systemically important payment stream for the ECH and continue to grow in use. They represented 63% of ECH transactions in 2018, accounting for 81% of the values processed. The volume of EFT credits increased by 46% whereas values increased by 78% from 2014 to 2018 (Figure 12). The average value of EFT credits also increased by 22% over 16 Based on data collected by the Central Bank from ECH, 2018. 17 Such efforts to curb cheque usage are in line with the strategic objectives outlined in the 2017 FSDIP as well as the (currently under revision) e-Government strategy that aims to “reduce the cost of administration through the current manual collection of funds and replace cheque payments by direct bank payments” (Government of the Kingdom of Eswatini, 2013). 18 The ECH EFT debit ceiling is E500 000.

the same period. This can be interpreted either as customers’ trust in EFT credits or as a migration in usage pattern away from lower-value retail payments towards trade, B2B, P2B where other channels are used.
Figure 14: Utilisation of Automated Clearing Houses (Transaction value/GDP) (2015–2018)
Source: Central Bank of Eswatini (2018), Central Bank of Namibia (2018), Central Bank of Mauritius (2018), Central Bank of Lesotho (2018) ECH utilisation low relative to that of other SADC countries. The ECH is even more underutilised than SWIPSS and has not seen any significant improvement in recent years. As a proportion of GDP, the values currently processed through ECH remains between 30% and 35%. This is a very low utilisation rate relative to similar-sized SADC countries such as Mauritius, Lesotho and Namibia (Figure 14: ). Operating the ECH at a suboptimal level is costly and suggests a need to consider the inclusion of, and aggregation with, alternative retail payment instruments to achieve a comparable level of efficiency and cost-effectiveness.
4.3.4. Mobile money
Mobile money usage rising, though inactivity rates still a concern. Mobile money has been a financial inclusion success story for Eswatini: usage of mobile money grew threefold in terms of transaction value as well as transaction volume since 2016, as depicted by Figure 15. Mobile money accounted for approximately 13% of retail payments in Eswatini in 2018 in terms of value and 88% in terms of volume. 19 But usage is not yet at its full potential: customer churn figures indicate that there is a significant proportion of subscribers who were inactive (40%) as at December 2019, as indicated in Figure 16. 19 Based on 2018 data collected by the Central Bank of Eswatini. Retail payments include EFT credit, EFT debits, cheques, POS transactions and mobile money transactions.

Figure 15: Total volumes and values of mobile money transactions (2016–2019)
Source: Central Bank of Eswatini (2019).
Figure 16: Proportion of inactive mobile money customers in 2019
Source: Central Bank of Eswatini (2019)
Increasing growth in P2B through mobile money, albeit off low base. Figure 17 indicates P2B payments are the most important use case by volume of transactions conducted through mobile money, even though Eswatini citizens still conduct most of their P2B payments in cash. This is not surprising, because P2B transactions are far more frequent and numerous in everyday life compared to other use cases such as remittances. The volume of P2B sharply increased by 338% between 2016 and 2019 (Figure 17). During the same period, P2B transaction values have tripled (Figure 18), though average transaction values remain low at SZL15 (Figure 19). This could be indicative of airtime purchases by a segment of the population with a lower income. Stakeholders consulted explain that merchant payments are a strategic priority for the MMOs in Eswatini (Stakeholder engagement, 2020). Therefore, it can be expected that P2B payments conducted through mobile money will significantly increase over the next five years. The question remains whether the MMO strategy will succeed in fully digitising a use case so far dominated by cash.

Figure 17: Aggregate volume of mobile money transactions by use cases (2016–2019)20
Source: Central Bank of Eswatini (2019)
Figure 18: Aggregate value of mobile money transactions by use cases (2016–2019)
Source: Central Bank of Eswatini (2019)
Figure 19: Average mobile money transaction values by use case (2016–2019)
Source: Central Bank of Eswatini (2019)
20 P2P – Person to Person, P2B – Person to Business, B2P- Business to Person, A2A – Agent to Agent, B2B – Business to Business.

Limited further growth potential for P2P. P2P is an important use case for mobile money, accounting for 51% of the total value of all the mobile money use cases in 2019. This is the largest use case by value for mobile money in Eswatini. From 2016 to 2019, P2P transactions increased by 228% in volume and by 187% in value (Figure 18). Average transaction values for P2P have declined by 12% (Figure 19). The steadily slower growth rate in annual volumes every year suggests that P2P payments may be closer to their ceiling, as 82% of remittances are already sent via mobile money. B2P remains underutilised. Figure 17 and Figure 18 also indicate that the value of B2P transactions remains markedly low compared to other use cases, accounting for only 5% of the total value of all the mobile money use cases in 2019. In fact, salary payments to employees are still mostly conducted in cash (73%) or into the employee’s bank account via EFT (23%), with mobile money accounting for only 3% of total salary payments. Mobile money agent network closer to maturity. While the aggregate value of cash deposits and withdrawals at agents increased by 167% and 168% respectively, their value per agent declined by 41% for both deposits and withdrawals respectively during the 2016–2019 period. 22 This may indicate that the mobile money agent networks are close to maturity and that further expansion may negatively affect profitability for agents due to market saturation. POS vol (million) Mobile money P2B vol (million) POS values (billion SZL) Mobile money P2B values (billion SZL) POS average transaction values (SZL) Mobile money P2B average transaction values (SZL) 2019 6 62 4 0.9 666 15.2 2018 5 36 3 0.5 643 15.0 2017 3 21 2 0.4 730 18.1 2016 3 14 2 0.3 803 19.4
Table 4: POS and mobile money P2B transactions volumes, values and average transaction values (2016–2019)
Source: Central Bank of Eswatini (2019)
Disparate trends for mobile money versus POS. In terms of volumes, Table 4 illustrates that mobile money is used 10 times more often than POS at merchants, and is growing at a faster pace than POS volumes. This data suggests that the demand for P2B payments conducted through mobile money is skyrocketing for low-value transactions, proving a latent demand which was previously unattended, while the demand for using cards at POS is growing organically and focuses on higher-value transactions. Average transaction values confirm different use cases. Table 4 indicates that the average transaction value for POS transactions outsizes P2B mobile money transactions 40 to 44 times in the years covered. This enormous gap in size suggests that these two payment instruments are used for very different use cases, where airtime purchases may be one of the main use cases for mobile money, and most probably by different segments of the population. 23 This finding is 21 FinScope, 2018. 22 Mobile money data collected by Central Bank of Eswatini, 2019. 23 According to GSMA, in 2015, airtime top-ups accounted for 66% of the volume of mobile money transactions.

consistent with the fact that mobile money is being used by those who were previously unbanked, as described in Section 4.2, generally corresponding to low-income people who make lower-value payments.
4.3.5 Alternative digital remote channels
Trends in channels for remote payments. Several banks in Eswatini have recently launched mobile wallets and banking apps, allowing customers to conduct remote payments without the need to come to a branch. Table 5 and Table 6 offer a comparison of remote payments conducted via cellphone or online banking, and through mobile money. Volume Cellphone banking (USSD) (millions)24 Online banking/ bank app (millions)25 Mobile money (millions)26 2018 3 2 44 2019 3 2 72
Table 5: Mobile phone transaction volumes by method of access (2018–2019)
Source: Central Bank of Eswatini (2019)
Value Cellphone banking
(USSD) (billions)
Online banking/ bank app (billions)
Mobile money
(billions)
2018 1 42 4
2019 2 183 5
Table 6: Mobile phone transaction values by method of access (2018–2019)
Source: Central Bank of Eswatini (2019)
Mobile Money preferred for phone-based transactions. As Table 5 illustrates, the volume of transactions conducted through cell phone banking or banking apps is very low compared to mobile money-based phone transactions, and the difference is increasing as the volume of mobile money transactions continues to grow from year to year. The growth in MMO-based transactions has been supported by a growing network which exceeded 5,000 active agents as at March 2020 (Table 3). USSD-based transactions highly popular. For the unbanked population, accessibility is key to facilitating higher volumes on mobile money. One of the main ways that unbanked populations are introduced to transacting with mobile money is through USSD. Stakeholders indicated that USSD was the most popular means of transacting not only for banks, but also for MMOs (Stakeholder engagement, 2020). Bank-based apps the preferred channel for high-value transactions. Table 6 indicates that aggregate transaction values on bank-based apps were 35 times greater than for mobile money in
2019. This suggests either that consumers prefer bank apps for conducting high-value transactions
24 Includes transfers, payments (water, airtime, DSTV etc.) and sending money to mobile wallet. 25 Includes transfers, payments (water, airtime, DSTV etc.) and sending money to mobile wallet. 26 Includes P2P, P2B, B2P, A2A and B2B. Excludes withdrawals and deposits.

or a difference in target customers between bank apps and mobile money. Banks appear to meet the high-value EFT transaction needs of institutional clients as well as the high-income customer market, whereas MMOs appear to capture the low- to middle-income market. This significant difference grew wider in just one year, as the transaction value conducted through bank apps grew 34 times higher, whereas the value of transactions conducted through mobile money increased by only 35% in the same period.
4.4. Cross-border payments in Eswatini
Cross-border payments refer to all inflows and outflows of money across the legal jurisdiction of the Kingdom of Eswatini. This section discusses the trends in cross-border flows in Eswatini.
Figure 20: Volumes and Values of cross-border flows on SADC-RTGS (2017–2019)
Source: Central Bank of Eswatini (2020)
Cross-border trade generates need for regional payments. Figure 20 illustrates the values (inflows and outflows) and volumes of cross-border transactions that have been processed through the SADC￾RTGS. The regional payment system is important mainly for businesses in Eswatini to make and receive cross-border payments for goods and services. The graph indicates that during the 2017–2019 period the total value of cross-border flows decreased by 14%, while total volume for cross-border trade increased by 20%. This suggests that higher-frequency, lower-value transfers are increasing proportionately in Eswatini. Cross-border flows for Eswatini are also largely outflows (59%) which may indicate that the country is a net consumer of regional good/services rather than a supplier to the region. Following a substantial drop in 2018, volumes and values started increasing again in 2019. The cross-border flows confirm that connectivity to the regional payment system is pertinent to Eswatini’s development. Substantial role for remittances confirms need for regional payment system integration. Figure 21 indicates that, in 2017, remittance inflows peaked, with an annual increase of 46% in transaction

values, whereas remittance outflows remained constant. In 2018, remittance inflows decreased by 12.5%, whereas outflows increased by 24%. The remittance market is predominantly receiver-based, with 84% of the remittance transactions representing inflows; but it remains small in absolute terms. FinScope data indicates that, in 2018, only 15% of adults who had received money in the past 12 months had received money cross-border (see Figure 22 in the annex). 27 Nevertheless, remittance inflows represent almost 3% of GDP (World bank, 2020). This demonstrates the importance of cross￾border remittances to the economic benefit of Eswatini.
Figure 21: Eswatini remittance flows (2014–2018)
Source: World Bank (2018)
To formalise cross-border remittances, it is important to ensure that the cross-border payment methods available to the public are affordable and efficient. Stakeholder insights indicate that banks are looking at reducing the costs of cross-border remittances to facilitate cheaper low-value cross￾border transfers, particularly within the SADC (Stakeholder engagement, 2020).
4.5. Conclusion
Overall, the payment trends in Eswatini show a rapidly changing landscape that has been and still is characterised by a strong divide. By 2014, the payment landscape was that of a strongly cash-based economy, with a clear divide between bank customers, who represented approximately half of the population, and the other half who were excluded from formal payment (and wider financial) services. During the following four to five years, mobile money penetrated all segments of the population and has become pervasive, particularly among low-income people who were previously unserved or underserved. Cash is still dominant for many use cases (P2B, G2P and P2G, for example). Yet, a clear￾cut divide is observed between higher-value transactions conducted through EFT or cards (both at POS and ATM), and lower-value transactions conducted through mobile money. These insights suggest that Eswatini has two payment markets operating in parallel: one that is served by banks, targeting medium- and high-income people, which represents a low share of all 27 61,423 adults.

retail transaction volumes (12.6%) but a high share of retail transaction values; and a second one that is served by mobile money, targeting low-income people, which already represents the vast majority of retail payments by volume (87.4%), although its relevance in terms of value is much smaller (12.5%). Given the current volumes and the upward trend for existing mobile money transactions, much higher-scale and broader benefits can be achieved if the high dependency on cash can be reduced.

5. Strategic imperatives
   This section outlines key themes that are considered imperative to optimising both the performance and the inclusive usage of the NPS, based on industry feedback, the analysis of payment trends in Eswatini as well as a high-level regulatory review. The strategic imperatives cluster into four categories: Payment System Digitalisation, Regulatory Payment Framework, Coordination, and Payment Innovation. The sections to follow start off by listing the strategic imperatives identified for the particular category, followed by a detailed overview of considerations and next steps for each imperative. In addition, CBE endorsements of key ecosystem development areas are specified. These encompass areas in which the CBE does not have the authority to effect change directly, but which do fall in line with the oversight mandate of the NPS to act as a “catalyst in the development of the national payment system” as per the 2019 National Payment & Settlement Systems Oversight Policy Framework. Towards ensuring that the NPS “continually evolves and achieves the level of technological and institutional development necessary to satisfy the payment needs of a growing, open, regional and internationally integrated economy,” the CBE encourages and endorses intervention to take place by the relevant entities, providers and government agencies which are accountable for respective enablers, and commits itself to proactively coordinating efforts with parties where necessary and required (CBE, 2019).
   5.1. Payment System Digitalisation
   Strategic imperatives:
6. Promote and strengthen the digitalisation of merchant P2B and B2B channels
7. Advance efforts towards interoperable, 24/7 and real-time payment functionality
8. Consolidate efforts and define a progressive strategy towards the phasing-out of cheques
   CBE endorsements of key ecosystem development areas

• Advance and complement existing payment gateway initiatives with industry actions to
  support and fast-track gains
• Coordination of amendments to the ECH and SWIPSS rules in line with new regulation
• Coordinate public and private efforts to strengthen the ICT eco-system
• Explore the potential to develop a digital ID utility under the new e-Government strategy
• Develop a coordinated and systemic approach to advance the digitalisation of government
  payments
  5.1.1. Payment Digitalisation strategic imperatives

Strategic imperative 1: Promote and strengthen the digitalisation of merchant P2B and B2B channels Current status. The acceptance of digital payment channels by merchants is a critical lever for the digitalisation of the payment system as it provides a key enabling use case for consumer adoption, and it can incentivise other merchants in a value chain to similarly digitise to conduct sales. Based on data analysed in Table 3 and Figure 4 of Section 4, the ongoing distribution of POS devices and banks cards remains a key strategy among banks to digitise Eswatini, including merchants. Yet, given further evidence from Figure 8 for the low use of electronic banking channels by merchants relative to cash, and the tendency for the distribution of these devices to favour urban regions with greater electrification and a larger branch footprint, it is becoming clear that traditional electronic banking channels cannot fully incentivise the acceptance of digital channels by merchants (and their customer base) alone. e-Money a growing tool to unlock digital P2B. Contrary to bank-led electronic channels, mobile money in Eswatini has become a near-staple for consumers to transact P2P, and, in addition, increasingly for P2B use cases. Figure 17 in Section 4 highlights that between 2016 and 2019, the volume of P2B payments via mobile money increased by more than fourfold. According to Table 4, the growth rate of mobile money P2B volumes has also steadily outstripped that of POS devices since at least 2016. These findings suggest that individuals are increasingly preferring more remote, convenient and digital channels for day-to-day P2B payments, and affirms the growing priority among MNOs to focus on this particular use case. The significantly larger footprint of mobile money agents relative to bank branches, as well as the existing familiarity of consumers with mobile money, makes e-money P2B channels, like mobile money, a key strategic tool to unlock and incentivise greater digitalisation of acceptance by merchants in Eswatini. Actionable next steps Expand the potential of e-money to digitise merchant payments. Industry stakeholders and illustrated data trends concur that while the roll-out of cards and POS devices may be enabling banked populations to go digital, e-money presents significant potential not only to incentivise greater digital P2B transactions, but also to stimulate this digitalisation in more remote and financially excluded regions. To effectively leverage these channels for enhanced digitalisation of merchant payments, however, will require concerted efforts to understand and overcome key hurdles that currently limit the potential reach of e-money. The following actions are therefore key when considering how to better enable e-money to digitise P2B, as well as B2B, payment use cases:

• Drive consumer-centric product designs: Identify and understand the payment needs of
  consumers as a guide to tailoring e-money P2B and B2B product offerings.
• Tailor offerings to incentivise merchant adoption: Engage in merchant consumer research,
  in both urban and rural regions, to understand the existing barriers to merchant acceptance of digital options, including both traditional banking channels and mobile money.
• Promote interoperability for improved convenience: Support interoperability between cards,
  POS devices and any other instruments via the planned switch such that digital ecosystems between banked and unbanked consumers can be better enabled.
• Foster an enabling mobile digital ecosystem: While many of the prerequisites for a thriving
  ecosystem are already in place, such as the 2019 CBE agent banking guidelines and the 2019 practice note for MMSPs, more can be done to support the use and business case of mobile money in Eswatini. This can be achieved by responding to ecosystem needs to enable more

active mobile money usage. These needs include investment in digitising value chains, and strengthening the cash reticulation system by widening the distribution of cash-in and cash-out points. This can be achieved by leveraging innovative network strategies such as the implementation of super-agent networks and novel liquidity management strategies and promoting agent interoperability to reduce invest in new agents. Strategic imperative 2: Advance efforts towards interoperable, 24/7 and real￾time payment functionality Current status. On 9 April 2020, the project charter for the Eswatini National Payment Switch project was finalised by the CBE (CBE, 2020). This project aims to address certain core processing gaps in the current NPS architecture. These gaps include:

• Non-bank digital financial service providers, such as MMOs, are excluded from participating in
  the national clearing and settlement system, thus forcing non-banks to operate as separate and siloed ecosystems.
• The unavailability of a 24/7 real-time payment system beyond EFT credit functionality and the
  identified underutilisation of the ECH in Figure 14.
• The lack of interoperable payments between banks and non-bank payment service providers, as
  alluded to in Figure 1.
  Actionable next steps
  Develop enhanced payment architecture that is needs-driven and fit-for-purpose. To address the above gaps and reap their benefits by consumers and businesses alike, it is imperative that the design and implementation of a National Payment Switch, or similar architecture, be needs-driven and fit-for-purpose. This would require thorough discussion about how best to achieve scale so as not to implement an underutilised and unviable infrastructure. An approach that balances the needs of participants with contextual challenges may be achieved by the following actions:
• Leverage existing scale. This can be achieved by exploring the use of pre-existing
  infrastructure located in a foreign jurisdiction or multinational hub to leverage scale. Third-party infrastructure allows for greater system agility for future functionality but limits national ownership. Existing scale can also be optimised by rationalising the number of competing payment channels in Eswatini such that NPS capacity and resources are streamlined and orientated towards the digitalisation of economic activity.
• Explore fit-for-purpose solutions. These may be less costly, similar to what other countries
  such as Namibia have done. Other forward-looking solutions may include overlaying ECH on a retail Central Bank Digital Currency, which could be nationally owned, be agile and run on existing rails to facilitate interoperability and instant payments.
• Encourage a collaborative approach. Follow a highly participatory design process driven by
  both bank and non-bank payment service providers.

Strategic imperative 3: Consolidate efforts and define a progressive strategy towards the phasing-out of cheques Current status. Cheques have been a hallmark of the Eswatini payment system for decades, but are less relevant in a modern and digitised NPS. As shown in Figure 13, the value and volume of cheque activity has steadily declined in recent years, in line with ongoing efforts by the CBE to discourage cheque usage by lowering the ceiling on cheque transaction values. 28 Although many banks support a coordinated approach to phasing out cheque usage, no uniform approach exists in practice and it currently remains unclear how differential approaches will take place in Eswatini without imposing unintentional negative consequences on consumers. Existing use cases for cheques in Eswatini must not be ignored. The remnant usage of cheques in Eswatini, despite CBE pressure to limit their usage, indicates that there are still some use cases for cheque payments, at least at a marginal level. The motivations of businesses and consumers to use these instruments should therefore not be ignored by local banks when devising their plan to phase out cheques. Doing so would not only make the NPS less efficient, but also leave market participants underserved in their payment needs. Based on a sample of cheque users29 surveyed by Cenfri between June and July 2020, the reasons that currently drive the use of cheques in Eswatini include:

• Financial exclusion: A lack of formal bank account access by population segments such as
  farmers and casual workers creates a use case for them to be paid by cheque.
• Weak valuechain digitisation: This discourages the use of more digitised payment methods
  as the value chain intermittently reverts to cash payments for immediate transactions.
• Bank charge avoidance: Cheques are considered more affordable than EFTs with their
  associated bank charges.
• Petty cash: Businesses prefer to use cheques to manage petty cash.
• Avoidance of fund misallocations: The potential for the misallocation of funds tends to be
  perceived by users as more likely to take place via EFTs than through cheques.
• Controlling cash flow: to delay actual outflows of cash
• Preference: Despite using a mix of payment services and instruments, some individuals report
  a preference for cheques due to a lack of tech-savviness and feeling comfortable using cheques.
• Alternatives not adequate: E-wallet limits and ATM limits are considered inconvenient and a
  driver for using cheques.
  According to the 2017 FSDIP, as well as industry consultation, government payments also constitute a significant proportion of paper-based payments in Eswatini. These payments primarily constitute G2P in the form of social transfers, but also payments to contracted vendors, though many of these payments have migrated to EFT channels. The above-described motivations for using cheques suggest that, while cheque use is falling, their removal must be considerate, with care taken not to exacerbate financial exclusion and reinforce cash dependencies. 28 These findings mirror trends observed across the region and have resulted in the Payment Association of South Africa declaring 31 December 2020 as “day zero” for cheque issuance and acceptance. This follows a number of public announcements made by major South African banks earlier in 2020 to discontinue cheques. Please refer here to the announcements made by Absa, FNB, Nedbank and Standard Bank regarding the discontinuation of cheques at the end of 2020. 29 The sample of cheque users surveyed also made use of a portfolio of payment instruments. This includes EFTs and mobile money.

Actionable next steps
Consolidate and define a consumer-centric approach to phasing out cheques. All industry players are in favour of a phase-out process or “day zero” for cheques (Stakeholder engagements, 2020). However, they were also aware of the consumer dependencies on cheques as noted above, and the need to adequately coordinate the process and provide customers who currently rely on cheques with suitable alternatives. A day zero in Eswatini should thus be pursued through a collaborative effort between industry and the CBE, and it should entail the common development of a time-dependent and risk-based action plan that places both the current and the future needs of consumers at its centre.
5.1.2. CBE endorsement of key ecosystem development areas

• Endorsement 5.1.2.1: Advance and complement existing payment gateway initiatives with
  industry actions to support and fast-track gains. The Royal Science and Technology Park (RSTP) is conducting an ongoing feasibility study to assess the regulatory and operational viability of a national payment gateway. The proposed switch by the CBE also aims to promote trade in the local e-commerce market through payment gateways. These initiatives are in line with the findings in Figure 17 that highlight increasing usage of mobile money for business purposes, and the need to support this growth. In the short term, however, ahead of these developments, the CBE endorses efforts by industry players to ready themselves and the payment system for the changes these initiatives will trigger and/or demand. These efforts should support transitions to a more interoperable and efficient system, plus help to fast-track the long-term gains pursued by existing initiatives. Focus areas for these efforts should include:
  ‒ Initiate processes to open private APIs. Although the proposed CBE switch aims to facilitate open APIs, the CBE encourages bank and non-bank FSPs to begin efforts to understand how they can support easy plug-n-play capabilities among themselves and other payment service providers such as merchants and fintechs. This process should be aligned with regulatory guidance and harmonised among FSPs within the payment industry. ‒ Upgrade messaging systems to support payment aggregation. The CBE supports advancements towards the migration of the NPS towards IS020022 or an equivalent messaging standard that can support the ubiquity of payment channels which can help to expedite payment integration processes for seamless and rapid e-commerce payment solutions.

• Endorsement 5.1.2.2: Coordination of amendments to the ECH and SWIPSS rules in line
  with new regulation. In order to mitigate the risks to the NPS of misalignment between the local payment infrastructure rule and that of the BIS PFMI, the CBE endorses ongoing efforts by the Oversight function of the Bank as well as technical assistance from the IMF to amend both the ECH and SWIPSS rules as necessary. In coordination with the Bankers and Management Committee and taking into account the new regulation that is under construction, the CBE endorses steps to take into consideration the following gaps. In particular:
  ‒ Amending ECH rules: Resolve ECH governance gaps to promote equal access and participation for new non-bank entrants. ‒ Amending SWIPSS rules: Amend SWIPSS rules and procedures to include an external arbiter to ensure fair governance.

• Endorsement 5.1.2.3: Coordinate public and private efforts to strengthen the ICT
  ecosystem. Reliable ICT services build consumer trust in digital financial services (DFS). The underutilisation of online mobile application services relative to USSD services in Figure 7 hints at how unreliable internet may be undermining the graduation of consumers to more digitally intensive P2B, B2P and G2P payments. The CBE thus endorses efforts towards promoting the enhancement of the ICT system in Eswatini as the crucial rails on which the NPS operates. These actions may include:
  ‒ Strengthening regulatory dialogue between relevant supervisors. Taking existing collaboration as a starting point, in terms of the CBE Bill and the NPS Bill, the CBE supports greater dialogue with the Eswatini Communications Commission (ESCCOM) to align objectives and collaboratively identify opportunities for intervention, particularly regarding the expansion of fibre internet to rural areas. ‒ Considering all existing potential solutions. The CBE endorses the consideration of all possible solutions to support improved connectivity, including local or regional ICT service providers. This could possibly involve harnessing infrastructure outside of the region or leveraging undersea fibre cables not yet utilised. ‒ Fostering industry innovation. The CBE endorses and will collaborate on additional efforts by ESCCOM and local service providers to support the development of innovation hubs to crowd in ideas to improve the ICT ecosystem.

• Endorsement 5.1.2.4: Explore the potential to develop a digital ID utility under the new
  e-Government strategy. The e-Government strategy that is under development represents a unique opportunity to explore the possibility of developing a digital and interoperable ID system that would significantly reduce customer friction, reduce the cost of compliance for providers and facilitate functionality for real-time payment switching using secure ID proxies on a national switch. The CBE thus endorses and encourages the Office of the Prime Minster to consider the implementation of a digital ID utility in Eswatini with these issues in mind, and recommends that these considerations be supported by a broad policy dialogue with different stakeholders such as other government agencies and regulatory authorities involved in different use cases for customer identification.

• Endorsement 5.1.2.1.5: Develop a coordinated and systemic approach to advance the
  digitalisation of government payments. Digitising the way in which citizens and the government interact is a critical lever for stimulating the broader acceptance, adoption and active use of digital payment mechanisms by the population. Yet, according to the latest FinScope results in Figure 9, only 12% of grant transfer recipients receive their transfers via a bank account compared to other mechanisms. To achieve broader digitalisation, the CBE endorses an approach that will not only foster strong coordination between the Office of the Prime Minister and all sectors of the economy, but will also focus on digitising all parts of the payment value chain, i.e. from the first to the last mile. The following actions are therefore proposed, and supported by the CBE, as key considerations to inform the ongoing e￾Government strategy revision in Eswatini:
  ‒ Foster an enabling environment. Active coordination between the Office of the Prime Minister, all government agencies, business associations and others will be needed to encourage the adoption and use of digital channels as opposed to sticky-paper-based payment options, ‒ Work with FSPs to incentivise digitalisation. Although most government transfers are still cash-based, FSPs can play a key role driving the use of digital bank accounts to save transfer funds and to keep those funds digital when transacting. The CBE therefore

encourages government agencies, through financial service regulators, to consider incentivising FSPs to play a more active role in this effort as well as to digitalise its own ability to accept and send P2G and GSP payments. ‒ Leverage public–private partnerships. The CBE endorses the efforts to consider public– private partnerships that can support the digitalisation of government payments by creating or strengthening platforms for easy-to-use and convenient digital P2G payments.
5.2. Regulatory Payment Framework
5.2.1. Payment Regulatory Framework strategic imperatives
Key defining payment governance regulation

• CBS Order (new CBE draft Bill under preparation)
• Financial Institutions Act 2005 (new draft Bill under preparation)
• National Clearing & Settlement Systems Act 2011
• MLFT (prevention) Act 2011, amended 2016
  Forthcoming:
• NPS Act (new draft Bill under preparation)
• CBE Act (CBE Bill 2019)
• Financial Institutions Act (FIA Bill)
  Key payment guidelines and directives
• Banking Practice Number 1 (2018)
• Mobile Money Transfer (MMT) Practice Note 2019
• NPS Minimum Standards for Electronic Payments 2010
• CBE Agent Banking Guidelines 2019
  Strategic imperatives

1. Prioritise the development of a comprehensive and consistent payment regulatory
   framework
2. Drive the development of a more enabling cross-border remittance licensing
   regime
   CBE endorsements of key ecosystem development areas

• Remove ambiguity in regulation for a full transition to a risk-based approach
• Adjust regulation to accommodate digital identity proofing system
• Simplify and streamline Balance of Payment (BoP) transaction codes

Strategic imperative 1: Prioritise the development of a comprehensive and consistent regulatory framework Current status. Findings from the gap analysis performed as part of the FSDIP identified several constraints that undermine the efficiency and development of the financial sector and the national payment system. These include a fragmented legal and regulatory framework with gaps, overlaps and ambiguities. Eswatini is currently in the process of developing and passing three Bills key to the efficiency of the national payment system. At the time of writing this document, these Bills are still in draft phase. They include the CBE Bill of 2019, the NPS Bill of 2019, and the FIA Bill. The main considerations for the payment system arising from these draft Bills include:

• The CBE will be handed full powers to oversee the National Payments System and all its
  players.
• Non-bank financial service providers are eligible for payment services licences and prudential
  requirements for both bank and non-bank players shall be risk-based.
• Non-bank financial service providers could be allowed direct participation in the National
  Payments System.
• Financial services and payment providers need to adhere to consumer and data protection
  dispositions, as stated by the regulation.
  In addition to these three Bills, Eswatini is also developing regulation for specific topics, such as the Computer and Cybercrime Bill 2013 and the Data protection Bill no 20/2017, which are aimed at closing regulatory gaps. At the time of writing, neither of these Bills had been promulgated into law. Actionable next steps Promulgate Bills under development. Priority should be given to promulgating the Bills currently under development into law, as they entail a significant improvement to the existing regulatory framework for payment systems. Coordination across the development of the Bills is imperative to ensure the harmonisation and consistency of the regulatory framework. Review rules and procedures accordingly. Once the laws are enacted, specific rules and procedures of the FMI need to be reviewed and adapted to ensure consistency with the laws and regulations. Issue guidance to the industry. The CBE should also provide further guidance to the industry, particularly in the areas newly covered by the legislation, including the licensing and participation process for payment providers, as well as the consumer protection principles, similar to those under the Guidelines on Banking Practice, 2018. Strategic imperative 2: Drive the development of a more enabling cross￾border remittance licensing regime Current status. Remittances are a vital source of livelihood in Eswatini, and for many a key driver of financial inclusion following its role as a primary use case to make use of formal financial services to send and receive value. Furthermore, as highlighted in Section 4, remittances have also become a predominant use case for mobile money and the digitalisation of payments in Eswatini. Yet while it seems that remittance senders have been able to benefit from the existing wide distribution of mobile money agents in Eswatini, appendix Figure 23 suggests that this is not the case for

remittance receivers, owing to their relatively lower dependency on mobile money as a method of receipt. While there may be a number of consumer-driven reasons behind this reduced dependency, a notable regulatory constraint in this regard is that, until the recently released 2019 MMSP Practice Note, MMOs have not been permitted to conduct cross-border remittances. This implies that, until recently, MMOs and other non-bank cross-border remittance providers have been unable to facilitate the receipt of cross-border remittances at the last mile, to the detriment also of remittance dependants. Although MTN has recently applied for permission to provide this service under the 2019 MMSP Practice Note, this gap in cross-border remittance services highlights a critical need for the cross-border licensing regime in Eswatini to be developed further and made more inclusive to attract other non-bank digital providers to support the provision of affordable and convenient cross-border remittances. Actionable next steps Foster a more enabling regulatory framework to receive remittances. Understanding how to facilitate more cross-border remittances will require knowledge both of the current barriers that inhibit their receipt and of the regulatory gaps that support those barriers. This suggests a clear need for more regulatory, consumer and, in particular, provider research to be conducted to identify their existing barriers to sending and receiving cross-border remittances or applying for the relevant licensing. Dialogue on policy will also be essential between industry and the CBE to investigate and determine how the current licensing regime requirements can be made more enabling. Such dialogue should also seek to incorporate considerations that support regional cooperation initiatives between remittance-sending hubs in SSA to enable faster and more affordable formal remittances such as the SADC Transactions Cleared on an Immediate Basis (TCIB) payment scheme.
5.2.2. CBE endorsements of key ecosystem development areas

• Endorsement 5.2.2.1: Remove ambiguity in regulation for a full transition to a risk-based
  approach. The amendment of the Money Laundering and Terrorism Financing Prevention Act introduced the concept of a risk-based approach. It is advisable, however, to eliminate the regulatory ambiguity arising from the coexistence of both a risk-based and a rules-based approach in the same Act. The CBE therefore supports efforts by the National Task Force on Anti-Money Laundering, which was established under the ML&TF Prevention Act, to advise the MoF on legislative and industry-based initiatives that are necessary to comply with best practice and international standards. Such initiatives, with the support of the CBE, may include:
  ‒ Issuing guidance on the risk-based approach. Ongoing work to issue guidance notes for the industry on the risk-based approach to AML/CFT is crucial to adding clarity and encouraging ongoing regulator–industry engagement that promotes a common understanding of the risk￾based approach. ‒ Increasing communication and capacity-building for effective implementation. Increased communication and engagement with industry is essential to inform, facilitate understanding and help industry to navigate the practical implications of the risk-based approach. In addition, capacity-building and training are needed to empower supervisors and compliance officers to develop a tailored approach to AML/CFT.
• Endorsement 5.2.2.2: Adjust regulation to accommodate digital identity proofing system.
  The NPS can benefit from developing a digital and interoperable customer proofing utility that could be used by financial service providers to identify and authenticate customers, and to route

payment transactions seamlessly. The CBE thus endorses efforts by the FIU to adjust the existing ML&TF Prevention Act to establish digital ID systems as a valid data source for identifying a customer. Such an adjustment should incorporate efforts to delineate a risk-based approach to identification by issuing specific guidance, as well as updating concepts of identity in the regulation such that they allow innovative identity solutions to be implemented. Towards innovation in identification, the CBE supports the following:
‒ Issue guidance on ID proxies and KYC innovation to manage known and unknown risks. It will be necessary to issue guidance to industry players on proxies and identifiers linked to instruments and transaction routing, and how they contribute to greater security of transactions. This will also enable industry to pursue more cost-effective methods of KYC compliance with the approval of the CBE, in pursuit of a more modern and secure payment system.

• Endorsement 5.2.2.3: Simplify and streamline Balance of Payment (BoP) transaction
  codes. Reducing the number of codes available at the retail level can improve the accuracy and completeness of BoP data and reporting, while streamlining systemic payment processes. Simplifying and consolidating BoP transaction codes can enable Eswatini to align better with the BIS PFMI and increase reporting accuracy. This would reduce the administrative burden on the industry and better reflect the status of the NPS. It will also align Eswatini better with other economies for improved comparability. The CBE is committed to working with MoF and the trade and industry ministry on the consolidation of the available BoP codes.
  5.3. Coordination
  Strategic imperative 1: Strengthen mechanisms for coordination between the CBE and other financial regulators and industry stakeholders Current status. Payments services act as the gateway for all financial services in a market. The interconnectedness of the payment system thus makes communication and coordination between the CBE and other financial service regulators critical to ensuring adequate oversight, and to promoting the harmonised development of the sector. The need for such coordination is recognised and promoted by the 2017 FSDIP through its formation of multi-stakeholder forums tasked with implementing policy recommendations. These forums include the Financial Sector Development Council and the Financial Sector Development Technical Committee. In addition, the 2019 CBE NPSS Oversight Policy Framework gives credence to the importance of dialogue on policy between NPS stakeholders through its establishment of the National Payment Council. 30 The task of the National Payment Council is to provide a “forum for cooperation and forms a key part of the institutional and governance framework for the NPS. It will comprise all relevant stakeholders with an interest or involvement in payment systems matters and operate as a consultative body, providing ongoing support to the CBE to ensure the payment and securities settlement systems are safe and efficient and a suitable array of modern, affordable payment instruments become available to the people of Eswatini” (CBE, 2019). Strategic imperatives:
• Strengthen mechanisms for coordination between the CBE and other financial
  regulators and industry stakeholders.

The growth of DFS ecosystems increases the need for coordination not only between NPS stakeholders, but also between all financial and non-financial regulators. Two of the main motivations for greater and broader coordination are:

• Innovation spans across different regulators’ mandates. Innovations in payments and
  broader financial services affect cross-cutting areas such as cybersecurity or data protection and are heavily reliant on a well-performing ICT infrastructure. These issues cannot be dealt with in silos by each regulator. The interconnected nature of these areas calls for a more coordinated approach across financial and non-financial regulators.

• Private sector innovation in payment and other financial services often outpaces
  regulation. Better and more regular engagement between innovators and regulators is needed to ensure that the regulatory environment is conducive to innovation and market development, with risk mitigation safeguards in place. This kind of regular engagement ensures that regulators remain updated on market developments and that innovators have the opportunity to seek advice regarding regulatory compliance. Scope for enhanced coordination. The existing coordination mechanisms can be enhanced on two fronts for optimal market development:

• Between regulators (and policy-makers). Positive examples of coordination efforts include
  the National Task Force on AML/CFT (mandated by regulation), as well as the recently created fintech innovation working group. Members of the latter include CBE, FSRA, ESCCOM, the Centre for Financial Inclusion and the University of Eswatini. Despite representing a step in the right direction, its full potential has yet to be tapped. More specifically, while members meet regularly and have a signed MoU, the forum would benefit from establishing more defined, legally binding rules of engagement that can enable greater transparency and accountability to deliver tangible outputs. The forum also precludes discussion on topics salient to the broader development of the payment ecosystem, such as cybersecurity or data protection. Other examples cited by the industry of where coordination could be enhanced include between the newly created market conduct department in the CBE, the Financial Service Regulatory Authority (FSRA) and ESCCOM. In addition, stakeholders perceive a growing need for further integration of ESCCOM into the payments policy dialogue led by the MoF with a view to strengthening coordination about topics that clearly affect the payment ecosystem, such as cybersecurity and data protection.

• Between regulators and industry: The private sector is considered a critical NPS stakeholder
  and a key contributor to the dialogue on policy under both the 2017 FSDIP and the 2019 NPPS Oversight Policy Framework. Industry players acknowledge and appreciate the existing communication channels in place, but advocate strengthening them. More specifically, coordination can be strengthened regarding: 1) the effective implementation of the risk-based approach towards CDD compliance for MMOs and commercial banks; and 2) facilitating understanding among innovators and start-ups on how to ensure their regulatory compliance with the CBE. Actionable next steps Proactively deepen cross-sectoral and intra-regulatory coordination. As outlined above, enhanced coordination between entities related to national FMI and the payment ecosystem would improve the ability of the CBE’s NPS division to effectively develop a sound and holistic risk￾management framework for the NPS in line with BIS PFMI 3. To resolve potential coordination gaps, the following measures to develop and strengthen existing coordination mechanisms between payment system participants should be considered:

• Expand the mandate and membership of existing working groups and forums. Existing
  working groups and forums for regulatory coordination should be expanded and given additional powers to coordinate measures in an evolving DFS landscape. This can be achieved by including non-financial regulatory authorities as members, such as the Competition Commission; by widening topics for consultation such as competition, data protection and cybersecurity, and by reinforcing the working group’s joint decision-making and planning capacity.

• Formalise binding coordination mechanisms. This implies developing formal coordination
  mechanisms for multilateral and bilateral coordination between regulators, for instance through binding MoUs. In other cases, it would imply expanding the scope of existing MoUs, such as that signed between CBE and ESCCOM or the Competition Commission, which would benefit from introducing market conduct among their areas of collaboration.

• Deepen dialogue with industry. Support the development and promotion of formal channels
  and/or forums for communication between industry sectors, as outlined in Section 5.4.
  5.4. Payment innovation
  Strategic imperative 1: Define a formal regulation for an innovation framework that supports more proactive communication and coordination Current status. The CBE introduced a fintech regulatory sandbox in 2019 “to allow for the live testing of innovative financial products, services and business models in a controlled environment, under the supervision of the relevant regulators” (CBE, n.d.). This is in line with the CBE’s mandate to enable innovation by creating an environment that is conducive to disruptive and consumer-centric innovation while also preserving consumer protection and maintaining the integrity of the market. The regulatory sandbox is also designed to engage critically with innovators to improve the capacity of the CBE to regulate innovation through “more open and active dialogue to improve regulatory clarity” (CBE, n.d.). Payment innovations continue to face hurdles. The objectives and the mandate of the CBE to support payment market development in Eswatini are clear and forward-looking. Yet, despite its ambitions, the CBE approach towards payment innovation faces a number of challenges. More specifically:

• Challenges to sandbox entry: Engagement with local payment fintechs and start-ups
  revealed three drivers of uncertainty among new entrants. These areas include: 1) lack of clear guidance regarding the licensing procedure for new products or services as well as access to information to ensure compliance; 2) low awareness of the entry requirements and objectives of the sandbox; and 3) a perception that the requirements to enter the sandbox are expensive and onerous, with cumbersome licensing documentation requested.

• Low perceived value: Both bank and non-bank innovators believe that the sandbox could
  provide more value. The banks’ perception is that the focus on fintechs and start-ups overlooks innovation efforts by commercial banks. Fintechs, conversely, seek more capacity-building Strategic imperative:

1. Define a formal regulation for an innovation framework that supports more proactive
   communication and coordination.

assistance from the CBE, as well as the facilitation of partnerships between payment ecosystem players to establish more effective pathways to market.

• Sandbox effectiveness: To date, only one financial/payment service provider has
  successfully entered the CBE regulatory sandbox. According to officials, the limited number of entrants is primarily due to applicants’ failing to meet entry requirements and not being of sufficient maturity. This lack of successful admission highlights a mismatch between the needs of market innovators and the design and expectations of the regulatory sandbox. This mismatch hampers the ability of the CBE to provide innovators with the support that they need. Actionable next steps Develop a framework to regulate innovation that places communication and industry needs at its centre. Strengthening the regulator’s engagement, as well as their coordination, with payment-sector innovators is essential to fostering a stronger and more enabling environment in Eswatini. This can be achieved by defining a formalised regulation-for-innovation framework. Doing so would entail:
• Revisiting and broadening the sandbox approach. An evaluation, revision and potential
  restructuring of the fintech regulatory sandbox is needed to enhance its ability to meet the needs of innovators, both bank and non-bank, as well as to satisfy CBE objectives to manage consumer protection and financial integrity risks. A first step towards this revision exercise should include interviews and discussions with fintech development bodies in Eswatini in order to understand the type of innovation currently taking place and whether alternative mechanisms besides a sandbox may be useful to enable innovation. For instance, new entrants or fintechs in the payment space may simply require proportional licensing requirements to operate as opposed to completely new regulation. The sandbox may also be replaced or tailored by a more flexible test-and-learn approach that could be potentially less onerous for the CBE to manage but which still enables rigorous supervision. A revised innovation framework may also consider establishing clearer avenues for engagement such as expanding office hours (physical and virtual) for an open-door policy or providing more explicit compliance guidance on the website.
• Promoting more inclusive communication with innovators and new entrants. Establishing
  more defined and formalised forums for industry engagement on innovation and market development, such as the EFWG, can support greater coordination and minimise information asymmetries. Potential forums for engagement should include industry forums for innovators of all stages of maturity to meet (from fintechs to commercial banks), discuss challenges and co￾create pathways with the CBE and the MoF for fintech development and fair participation in payment systems. An additional forum with MMOs and banks could also be envisaged to provide a response to the industry need for increased dialogue on innovations.

6. Implementation of the strategic
   imperatives and enablers
   Ownership and implementation
   The Central Bank of Eswatini, as the National Payment System regulatory authority, together with the Ministry of Finance as the primary policy-maker responsible for promoting a sound financial sector to which the NPS contributes, are key drivers of the implementation of the strategic imperatives contained in this document. To enable the CBE to implement these imperatives, which are of national interest, successfully, the cooperation of all participants (banks, non-bank financial service providers, credit providers, vendors and other relevant stakeholders) would be required. In line with national policy objectives for the broader development of the payment ecosystem, the CBE endorsed key ecosystem development areas that will also require the support of existing national council bodies, working groups and forums, including the FSDIP Payments working group, relevant NFIS payment task teams, and the NPC established under the 2019 NPSS Oversight Policy Framework. Cooperation with other financial and non-financial regulators such as ESCCOM will also be crucial to supporting the successful implementation of identified enablers and their action points. Key actions
   Table 7 outlines, at a high level, the key actions that need to be taken to achieve each of the identified
   strategic imperatives. It also identifies those payment participants and actors who are accountable for progressing each imperative. Table 8 provides an overview of the identified key ecosystem development areas that are endorsed by the CBE, as well the respective champion(s) endorsed per area. Strategic imperatives Key actions Responsibility Payment System Digitalisation
7. Promote and strengthen
   the digitalisation of merchant P2B and B2B channels Expand the potential of e-money to digitise merchant payments:

• Drive consumer-centric product
  designs
• Tailor offerings to incentivise
  merchant adoption
• Promote interoperability for
  improved convenience
• Foster an enabling mobile digital
  ecosystem
• CBE NPS
  department
• Commercial bank
  associations
• MNOs

2. Advance efforts towards
   interoperable, 24/7 and real-time payment functionality Develop enhanced payment architecture that is needs-driven and fit-for-purpose:

• CBE
• Technical industry
  project team members on the

Strategic imperatives Key actions Responsibility

• Leverage existing scale of
  payment infrastructure
• Explore fit-for-purpose solutions
  to meet Switch users’ expectations
• Encourage a collaborative
  approach between Switch project participants
  NPS Switch project, including ECH, commercial banks, MNOs and ESCCOM

3. Consolidate efforts and
   define a progressive strategy towards the phasing-out of cheques Define a consumer-centric approach to phasing out cheques, driven by:

• Existing consumer use cases
• Industry collaboration
• Mutually developed time
  dependencies
• Coordinated risk-based action
  plan
• CBE
• Commercial bank
  associations
• ECH
• FSRA
  Regulatory Payment Framework

4. Prioritise the development
   of a comprehensive and consistent regulatory framework Advance efforts to specify and clarify regulatory guidance for market participants through:

• Promulgating Bills under
  development
• Reviewing rules and procedures
  accordingly
• Issuing guidance to the industry
• Ministry of Finance
• CBE
• ESCCOM
• ECH Bankers
  Committee

5. Drive the development of a
   more enabling cross￾border remittance￾licensing regime Foster a more enabling regulatory framework for receiving remittances:

• Conduct research to understand
  current provider barriers to apply for licensing
• Foster dialogue on policy
  between industry and CBE to inform an enabling cross-border licensing regime
• Promote regional cooperation
  with key sending country hubs to support existing cross-border initiatives
• CBE NPS
  department
• CBE exchange
  control department
• CBE banking
  supervision department
• FIU
• Commercial
  bankers’ association
• Money transfer
  operators
• MNOs
  Coordination

Strategic imperatives Key actions Responsibility
6. Strengthen mechanisms
for coordination between the CBE and other financial regulators and industry stakeholders Proactively deepen cross-sectoral and intra-regulatory coordination:

• Expand the mandate and
  membership of existing forums
• Formalise binding coordination
  mechanisms
• Deepen dialogue with industry
• CBE
• ESCCOM
• Competition
  commission
• FSRA
• Regulatory Fintech
  Innovation Working
  Group
  Payment innovation

7. Define a formal regulation
   for innovation framework that supports more proactive communication and coordination Develop a framework to regulate innovation that places communication and industry needs at its centre:

• Revisiting and broadening the
  sandbox approach

• Promoting more inclusive
  communication with innovators and new entrants

• CBE

• Fintech hubs and
  associations

• MNOs

• Commercial banks
  Table 7: Key actions and responsibilities to achieve the strategic imperatives
  Endorsed key ecosystem development areas Endorsed champion(s) Payment System Digitalisation:

• Advance and complement existing payment
  gateway initiatives with industry actions to support and fast-track gains, including:

• Initiating processes to open private
  Application Programming Interfaces (APIs)

• Upgrading messaging systems to support
  payment aggregation

• Coordination of amendments to the ECH and
  SWIPSS rules in line with new regulation, including:

• Resolving ECH governance gaps to promote
  equal access and participation for new non￾bank entrants

• Amending SWIPSS rules and procedures
  to include external arbiter to ensure fair governance

• RSTP

• MNOs

• Commercial banks

• ECH Bankers Committee

• Electronic Clearing House
  Management Committee

• CBE Oversight unit

• Coordination of public and private efforts to
  strengthen the ICT ecosystem, by:

• Strengthening regulatory dialogue between
  relevant supervisors

• Leveraging existing local or regional ICT for
  enhanced connectivity

• Fostering industry innovation

• Explore the potential to develop a Digital ID utility
  under the new e Government strategy

• Development of a coordinated and systemic
  approach to advance the digitalisation of government payments, by:

• Fostering an enabling environment

• Working with FSPs to incentivise digitalisation

• Leveraging public–private partnerships
  Regulatory Payment Framework:

• Remove ambiguity in regulation for a full
  transition to a risk-based approach by:

• Issuing guidance on the risk-based approach

• Increasing communication and capacity￾building for effective implementation

• Adjust regulation to accommodate digital identity
  proofing system, including:

• Issuing guidance on ID proxies and KYC
  innovation to manage known and unknown risks

• Simplify and streamline Balance of Payment
  (BoP) transaction codes

• ESCCOM

• MNOs

• Commercial bank associations

• Office of the Prime Minister

• Office of the Prime Minister

• Ministry of Finance and other
  government agencies

• Commercial banks

• MNOs

• Ministry of Finance

• National Task Force on AML/CFT

• CBE

• FSRA

• Office of the Prime Minister

• Ministry of Finance

• FIU

• Ministry of Finance

• Ministry of Trade and Industry
  Table 8: CBE endorsements of key ecosystem development areas

7. Annexure
   Figure 22: Cross-border remittance senders and receivers (past 12 months) (2018)
   Source: FinScope Eswatini (2018)
   Figure 23: Method of receiving domestic remittances (% of domestic remittance receivers) (2018)
   Source: FinScope, Eswatini (2018)

8. Glossary
   Term/acronym Definition/description
   Agent
   A person (natural or juristic) who has authority to act on behalf of and legally bind his principal contractually with third parties. When an agent receives money on behalf of his principal, he acts as a conduit, and money paid to an agent is treated as having been paid to the principal. The person paying the money has no right to claim it back from the agent, but must look to the principal, even if, in fact, the money is still in the hands of the agent. Bank A public company retested as a bank or a mutual bank in terms of the provision of the Financial Institutions Act. Bilateral Clearing A clearing arrangement between two banks (transacting parties). Bulk clearing Process A process by which high-volume payment instructions are aggregated and interbank settlement obligations are determined. Clearing Exchange of payments and the calculation of payment obligations between system participants. Clearing Bank A bank that participates in the clearing of payment instructions between banks. Clearing House (Payment Clearing House) Any formal arrangement between banks where participants exchange payment instructions. Collateral Acceptable securities provided by banks to the central bank for liquidity purposes. Credit Risk The risk that a bank bears in the event of a counterparty not settling an obligation for the full value, either when due or any time after that. Cross-border Transaction A transaction where at least one of the parties is located outside the home country. Customer Due Diligence Refers to the preliminary screening process of a customer conducted by an accountable institution to assess the risk level of that customer through performing background checks. These checks will, among other factors, establish a prospective customer’s compliance history, thus leading to a decision on the viability of establishing a relationship with the customer. Gross Settlement Settlement of an interbank payment on a settlement-instruction by settlement￾instruction basis. Interoperability The ability of users of different mobile money services to transact directly with each other. This refers to a situation in which payment instruments belonging to a given payment scheme may be used in other countries and in systems installed by other payment schemes. Interoperability requires technical compatibility between systems but can take effect only where commercial agreements have been concluded between the payment schemes concerned.

Intraday Settlement Settlements that take place within one settlement day cycle (within one value day). Know Your Customer Means the set of due diligence measures undertaken by an accountable institution in knowing an individual client or the way in which the client’s business operates, the client’s physical address, the owner’s physical address and identity, and further possible confirmation of principal owners or real owners of business entities. KYC also pertains to the verification of whether a customer is a potential Politically Exposed Persons (PEP), and the further conducting of an enhanced due diligence after that. Liquidity Risk The risk that a bank will not have sufficient liquidity to meet its settlement obligations (temporary need for funds). Mobile Money Service Provider (MMSP)/ Mobile Money Operator (MMO) An entity licensed or authorised by the Central Bank of Eswatini to issue Mobile Money and provide Mobile Money Services. Net Settlement The settlement of netted interbank obligations on a multilateral or bilateral basis. Payment Instrument Every instrument that provides a method of exchanging value for money, i.e. notes and coins, paper and electronic instructions. Payment Transfer of value and the related information. Real-Time Gross Settlement A settlement practice by which the settlement of interbank obligations takes place in real time. Settlement Refers to the final and irrevocable discharge of an obligation of one bank in favour of another bank, in central bank money. Settlement Risk The risk that a settlement in a transfer system will not take place as expected. This risk may comprise both credit and liquidity risk. Switching An electronic system employed to transfer payment instructions, initiated by customers, between participating banks within an NPS. Systemic Risk The risk that the failure of one participant to meet its contractual obligations could deprive other participants of funds owed to them, resulting in a chain reaction in which a large number or all of the participants in a settlement system are unable to meet their respective obligations. Trust Account Means a bank account held by a licensed institution for and on behalf of the participants in the mobile money service who have deposited cash in exchange for e-money.
Table 9: Glossary of terms

9. Stakeholder list
   Organisation Date of meeting
   Central Bank of Eswatini NPS division 12/03/2020 Nedbank 15/04/2020 Enactus 16/04/2020 Royal Science Technology Park 22/04/2020 Eswatini Mobile 23/04/2020 Standard Bank 24/04/2020 ESCCOM 24/04/2020 Eswatini Clearing House 28/04/2020 MTN 29/04/2020 First National Bank 05/05/2020 Letshego 06/05/2020 Eswatini Bank 07/05/2020 Swazi Royal Insurance Corporation 08/05/2020 Eswatini Postal and Telecommunications Corporation 13/05/2020 Eswatini Stock Exchange 18/05/2020 Financial Services Regulatory Authority 19/05/2020 CBE Fintech Unit 20/05/2020 CBE AML/CFT division 26/05/2020 Ministry of Finance 02/06/2020 Eswatini Financial Intelligence Unit 03/06/2020 CBE Economic Policy Research & Statistics Department 09/06/2020 CBE Market Conduct 22/06/2020 E-Government Unit 24/06/2020
   Table 10: Stakeholder list for remote consultations