A government body wants to make it easier for fintech firms to test new products that aren’t covered by existing regulations.
Today, (23 April 2020), the Intergovernmental Fintech Working Group (IFWG) called on SA finance companies and startups to apply for the Regulatory Sandbox, during a live stream.
In the sandbox, companies will be exempted from regulations while they test new services. The goal is protect consumers while making way for new products that will improve financial services.
The IFWG is made up of the following financial services organisations:
- National Treasury
- Financial Intelligence Centre
- Financial Sector Conduct Authority
- National Credit Regulator
- South African Reserve Bank
- South African Revenue Service
During the live stream, Gerhard Van Deventer, Senior Fintech Analyst at the South African Reserve Bank, and Kagiso Mothibi, Head of the Fintech Department at the Financial Sector Conduct Authority, outlined the process.
Mothibi explained companies in the sandbox will be able to test products and services that don’t fit into existing regulations. Testing will start on 1 July. The testing period is six months.
“Regulators can provide exemptions in order to safely test the products over that six-month period.”
However, exemptions won’t be available for all regulations.
“We will review these on a case-by-case basis,” said Mothibi.
Van Deventer summarised the criteria for participating companies:
- Business to Consumer: increase competition, improve financial inclusion
- Business to Business: lower costs, increase efficiency, and improve compliance
Products must be fully developed and should “challenge the existing framework”, added Van Deventer.
Plus, the idea should be different from existing services on the market.
Van Deventer encouraged applicants to conduct their own research so they can highlight how their service is not covered by current policies.
Once testing has been completed, the group may lobby for regulatory change.
It’s hoped the unit will “shape regulations that provide clear benefits to financial services,” added Mothibi.
Although several countries have launched similar initiatives, South Africa was unique because of the collaboration of several financial bodies.
In addition to the regulatory sandbox, the IGFW has a regulatory guidance unit: a single entry point for fintech companies to ask questions about regulations
Dr Arif Ismail, chairperson of the IFWG, said fintech firms had an especially important role to play as “local and global economies navigate this period of uncertainty”.
In a report jointly released by the IFWG in February, it states:
“SA has a small but fast-growing fintech industry, presenting considerable benefits and risks.
As a result, regulators need an understanding of the fintech landscape in South Africa in
order to manage risks in a way that does not stifle innovation.”
The closing date for applications for the first round of the regulatory sandbox is 15 May.
For more information visit the IFWG website.