The Reversal of Electronic Payments Under South African Law: Possible Guidance from Recent Developments in European Union Law
Author WG Schulze
Affiliations: Professor in Banking Law, University of South Africa
Source: South African Mercantile Law Journal, Volume 32 Issue 1, 2020, p. 22 – 50
It is generally accepted that the development of and growth in electronic banking, and particularly the growth in electronic payments, has raised a number of burning legal issues in South African banking law. One of the hitherto unresolved issues concerns the circumstances under which an electronic transfer can be reversed. In terms of the standard bank–client agreement, a credit transfer can be reversed only with the consent of the recipient of the money. Such an arrangement is clearly flawed and impractical. With fraud, for example, it is not fair towards the party who has been defrauded for it, or its bank, first to obtain the fraudulent recipient’s consent before the transfer can be reversed. This article considers South African case law in which the reversal of an electronic payment was scrutinised. It further considers recent developments in European Union law regarding the notification and rectification of unauthorised, or incorrectly executed, payment transactions. Some observations are made about the possible guiding role that European Union law may play in formalising the South African law regarding electronic payments, should such initiative be undertaken by either the banking and payment community or the South African legislature.