6 major new proposals for the South African banking and finance sector
BUSINESS TECH / 07 JULY 2018 - 16.01 / STAFF REPORTER
The Intergovernmental FinTech Working Group (IFWG) recently released its report on its inaugural market outreach workshop.
Held in April, the workshop provided a platform for regulators and policymakers to engage with industry, with a number of proposals emerging including many focusing on financial inclusion and changes that could be made to the current banking and finance sectors.
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In addressing regulatory challenges and effectively making use of technology to drive financial inclusion, the workshop delegates put forward the following six suggestions for regulators to consider:
Consumer protection measures for new kinds of digital assets like crypto-currencies
One presenter believed that the market conduct regulator should consider tools such as investor screening requirements or monitoring the authenticity of ICO (Initial Coin Offering) white papers.
There was significant debate among the delegates on whether such measures where necessary, with some viewing the current price volatility in the crypto market as a sign of its immaturity, similar to the price swings witnessed when global gold markets emerged, and the fact that these will reduce once the market matures.
A digital identity for every South African
One delegate argued that the key goal of regulation is to create the right market conditions for access and participation in the sector.
In response, delegates were unanimous in recognising that a digital identity for every South African would level the playing field and allow all to participate in the future as new technologies become available.
Open banking and APIs
As most consumer data is held by banks, a delegate believed that mandating interoperability and open banking would have a significant impact on opening up the financial sector and encouraging innovation and competition.
This includes supporting network effects by allowing fintechs to ‘plug-and- play’ within a more accessible payments environment.
Central bank issued crypto-currency
A presenter argued that a stable and trusted coin that does not have drastic price fluctuations could enable the many DLT use cases currently being discussed for financial inclusion (such as fractional ownership of assets, including land, and providing alternative forms of collateral to access finance).
These opportunities are currently impractical due to crypto price volatility.
Regulatory and private sector engagement
The need to bring together all relevant stakeholders required to solve the financial inclusion challenges, including private sector and regulators (and non-financial regulators such as those issuing identity), was noted as critical by a number of delegates.
Delegates were clear that the discussions initiated through this workshop should continue and were all in favour of a regulatory sandbox approach that would allow fintech firms to cooperate with regulators and share data.
Digital literacy and skills development
A number of delegates noted that the challenges of the digital divide and income constraints among the financially underserved in South Africa required a broader focus than financial regulation.
Education was cited as being critical – both in terms of financial and digital literacy and in terms of equipping the financial sector with the right skills for innovation – as well as building the broad ecosystem enablers such as low-cost access to computers and the internet.
A common thread throughout the financial inclusion discussion was the importance of having a clear policy objective in mind. A presenter noted that financial inclusion was not all that was required, but a means to improving the well-being of South Africans.
As such, the conversation stressed that financial innovation was about more than providing people with access to financial services, but making sure that these services made a meaningful difference in people’s lives.
Regulators therefore have the difficult task of identifying what type of innovation best meets the objectives of improving the well-being of South Africans, and how best to encourage this innovation while keeping the financial system safe and inclusive.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER