SA regulators form intergovernmental fintech hub
Six local financial regulators this week announced the formation of an Intergovernmental Fintech Working Group Innovation Hub, to respond to the changes in the financial sector, driven in part by the fast-moving world of financial technology.
The Innovation Hub is intended to support the sector in introducing innovations that complement regulators’ core mandates, including financial stability and soundness, consumer protection, financial inclusion and fair lending practices.
It also means those at the forefront of financial innovations can use the hub as a “one-stop-shop” in working towards regulatory approval.
Launched on Tuesday, it says in a statement that fintech innovation is particularly well-suited to respond to the economic impact of the COVID-19 pandemic as local and global economies navigate this period of uncertainty.
“The Intergovernmental Fintech Working Group (IFWG) believes innovation among fintech firms and other financial sector innovators is required now more than ever and, therefore, must be supported.”
The hub is part of the IFWG, which was formed in 2016, and is composed of members of the Financial Intelligence Centre, Financial Sector Conduct Authority, National Credit Regulator, National Treasury, South African Revenue Service and South African Reserve Bank (SARB).
Arif Ismail, head of the SARB’s fintech unit and chairperson of the IFWG, told ITWeb that the major questions are: Is it possible to stimulate more digital payments, especially to communities that frequently use cash? Are there solutions available in order to be able to do that?
“The solutions should ideally be scalable, secure and cost-effective, and as we know, these ecosystems take time to build.”
Ismail says the hub will provide a number of services, such as a regulatory guidance unit.
“We can look through their query and understand what the innovation is about. Rather than the innovator going through the regulators one at a time, you can use the IFWG as a one-stop-shop.”
Once the query is logged, it will be “tracked and traced”, and Ismail promises it won’t be “lost in the ether”.
The six regulators will then craft a response, and provide feedback in a responsible and timely manner, without, he says, crossing any regulatory or legal hurdles.
The IFWG is also making a regulatory sandbox available to innovators, which looks for “stretches in thinking” around innovations in the financial services domain. “What we want to understand is that if you’re proposing a particular innovation, which aspects of law or regulation do you think need to be challenged, or shifted, responsibly? You may be seeking guidance, and you’re not sure about the regulatory framework.
“What we could possibly do is to come back to you, and say: In the sandbox, you can run your digital infrastructure, but we’ll give you permission, if you fit the criterion, to go ahead with a set of live transactions, with a minimum set of customers, while we experience that collectively with you.”
In this way, the innovator is able to move forward with their project in partnership with the IFWG.
Applicants can apply for entry into the sandbox programme on the IFWG Web site.
Finally, it is also making available an Innovation Accelerator.
Ismail says this is not an accelerator in the sense of a project incubator, and it is perhaps more accurate to call it a ‘policy accelerator’.
This is meant to hone the regulators’ thinking around particular innovations, be they crypto assets or crowdfunding, for example.