South Africa’s proposed Conduct of Financial Institutions (COFI) Bill is poised to catalyse innovation in financial services, strengthening the country’s competitiveness in a rapidly-evolving global financial landscape.
This is the sentiment shared by industry leaders from the Financial Sector Conduct Authority (FSCA), delivering presentations this week at the FSCA Conference 2026.
Discussing the state of SA’s financial services and the impact of the COFI Bill on the sector, they pointed out that the Bill is anticipated to promote financial innovation by establishing a flexible, activity-based regulatory framework designed to move away from rigid, rules-based supervision, towards a technology-neutral, activity-based framework that can keep pace with rapid digital transformation.
The COFI Bill is a regulatory reform to create a single, comprehensive law to oversee the conduct of all financial institutions. Part of the “Twin Peaks” system, it aims to enhance consumer protection, improve transparency and promote transformation.
While National Treasury handles the policy and drafting of the Bill, the FSCA is involved in designing the regulatory framework and conduct standards that will accompany the Bill.
Eugene Du Toit, head of regulatory frameworks at FSCA, noted that the accelerating adoption of artificial intelligence (AI), the rise of fintech platforms and the emergence of open finance ecosystems are fundamentally reshaping the financial sector, requiring a new regulatory approach.
“Digital artificial intelligence, cross-sector demands, technological advancements − all of these risks demand a harmonised and outcomes-based approach, and also a technology-neutral approach to how you regulate. The world is changing very fast and COFI in a way represents a chance to reset the conduct architecture of our system,” he stated.
By focusing on activities rather than institutions, the framework is expected to better accommodate fintech entrants and platform-based business models, while also enabling incumbent firms to integrate AI and data-driven services more effectively, he asserted.
While the Bill is currently with the finance minister, with potential enactment scheduled for early to mid-2027, Du Toit indicated it is likely to reach Parliament this year, marking a milestone for the sector.
He urged industry players to focus not only on compliance readiness, but on how the framework can be leveraged to drive innovation and competitiveness.
“COFI isn’t just appearing out of nowhere. It’s really part of a continuum, almost the next logical evolution in a long-running effort to strengthen trust, protect customers and build a modern, competitive financial sector. COFI is not the end of reform, but it is definitely the beginning of a new era for our sector,” he said.
Delivering a keynote address at the conference, FSCA commissioner Unathi Kamlana pointed out that the future of innovation in SA’s financial sector will depend on regulatory evolution as much as on technological advancement.
Central to this shift is the COFI framework, which he positioned as a key enabler of sustainable innovation rather than constraining it.
While acknowledging the rapid rise of emerging technologies, such as AI and advanced data analytics, Kamlana argued that regulation must evolve in parallel to ensure innovation can scale responsibly.
“Regulation, like the financial system itself, cannot remain static,” he said. “The challenge is not simply to regulate more, but to regulate better, in a way that supports innovation, while ensuring the right outcomes are achieved in practice.”
At the heart of this approach is COFI’s move away from rigid, rules-based supervision towards a principles- and outcomes-driven model. Kamlana explained that this shift is critical in a sector where technology is evolving faster than legislation can keep pace.
“Rather than attempting to prescribe detailed rules for every possible situation, COFI establishes clear principles, such as fair customer outcomes, transparency, market integrity and sound governance.
“This creates the flexibility that allows new technologies and business models to develop without being constrained by outdated regulatory frameworks.”
This flexibility, he suggested, is what will ultimately spur innovation. By focusing on outcomes rather than processes, COFI gives financial institutions the space to experiment with new technologies, products and delivery models, provided they can demonstrate these innovations serve customers fairly.
“Institutions must not only consider whether they have complied with rules, but whether the products they design and the services they deliver genuinely serve the interests of financial customers. That shift encourages more thoughtful, customer-centric innovation,” Kamlana explained.
By aligning regulation with the realities of AI, fintech and open finance, COFI is expected to create a more enabling environment for innovation, while maintaining a strong focus on customer outcomes and market integrity, added Du Toit.
A key feature of COFI is its alignment with open finance principles, where multiple players contribute to a single customer journey, often enabled by APIs, data sharing and digital platforms.
Du Toit highlighted that the Bill introduces a more coherent conduct framework that recognises these interconnected systems and assigns accountability across them.
“It [the Bill] creates this single modern conduct architecture aligned to emerging risks, embedding fit outcomes, and simplifying and rationalising a very fragmented conduct framework. This is really conduct regulation in its most modern form, focusing on what customers experience and not just what financial institutions file,” he said.
This is expected to support innovation in areas such as embedded finance and digital distribution, where traditional regulatory boundaries have struggled to keep up, he noted.
Data-driven supervision
COFI will also place greater emphasis on data and reporting, reflecting the increasing importance of real-time insights in a digital financial system.
Du Toit noted that institutions will need stronger data capabilities to monitor conduct risk, particularly as AI and digital platforms generate more complex and dynamic risk profiles.
“We know that, for example, there will be emphasis on ensuring firms have better data on understanding their conduct risks. So do you have the data capability to receive this data, to analyse it, to monitor conduct risk?”
This data-centric approach is expected to support more proactive supervision and enable regulators to better understand risks emerging from fintech and AI-driven models.
“Conduct can no longer sit as a compliance function on the side. It must be governed from the top, founded on a very sound culture. The sector moves away from reactive compliance to proactive conduct maturity, where fairness is designed into the products itself, the services and the business models,” Du Toit concluded.
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