Inaugural Intergovernmental FinTech Working Group Workshop - April 2018

This inaugural Intergovernmental Fintech Working Group (IFWG) market outreach is a significant event for regulators of financial services in South Africa. It signals the importance of financial technology (fintech). This phenomenon has the potential to reshape the financial services industry by removing market inefficiencies. Novel solutions resulting from exploiting emerging exponential technologies such as application programming interfaces, big data, blockchain, cloud computing, distributed ledgers and emerging alternative internet-enabled platforms claim the potential to reduce frictional costs, lower information asymmetries (for consumers and providers) and decrease moral hazard. Improving overall social welfare may be one of fintech’s greatest promise. In recognising this potential, the Financial Intelligence Centre (FIC), Financial Sector Conduct Authority (FSCA), the South African Reserve Bank (SARB) and National Treasury (NT) have collaborated to ensure that this fintech potential can be fully leveraged. However, authorities are quick to note that innovation in financial services is best left to market forces and competitive dynamics. At the same time, authorities are fully aware that regulation needs to keep pace with innovation, due to equally potential risks. Regulators shoulder the responsibility to assess and manage these risks. Intermediation risks include consumer protection concerns, money-laundering considerations, general business risks which include more macro-level financial stability risks. Greater interconnectedness through growing made up of alternate financial services platforms may have impact on financial stability. Such platforms may grow quickly and may become too-large-to-ignore. True to its nature, the fintech domain is in flux and morphing into never seen before services. The domain is complex and impacts every aspect of financial services: deposits, insurances, payments, lending and investments. Given this complexity, the IFWG has put its focus on obtaining input on three significant topics. These include private crypto-currencies and initial coin offerings (ICOs), financial inclusion and innovation facilitators. The presentations, discussions and debates have drawn out and confirmed the major concerns and suggestions and these are well documented in this report. Your review of this report is mostly welcome and your recommendations are already being reviewed and taken into consideration.