An Intergovernmental Fintech Working Group (IFWG) was established in 2016 to understand the growing role of financial technology (fintech) and innovation in the South African financial sector and explore how regulators can proactively assess emerging risks and opportunities in the market. There are 6 regulators which participate in the IFWG, namely National Treasury, the Financial Intelligence Centre, the Financial Sector Conduct Authority, the National Credit Regulator, the South African Reserve Bank and the South African Revenue Service.
On 7 April 2020, the IFWG announced the launch of the IFWG Innovation Hub which will respond to changes in the financial sector driven by fintech and to promote responsible innovation. The IFWG believes that given the uncertainty and challenges resulting from the COVID-19 pandemic, there is a need, now more than ever, for innovation by fintech firms and innovators in the sector. The Innovation Hub will assist and support innovators irrespective of whether they are a start-up, an establish fintech firm, an existing financial services provider or a business looking to enter the financial services market.
As innovations and new technology often test the boundaries of regulation, the Innovation Hub has been set up to help firms in the financial sector to obtain clarification on regulation, to have access to a sandbox environment to test the regulatory fit of innovative solutions and to provide input through various forums and initiatives on future regulation relating to new developments in fintech.
The Innovation Hub has set up 3 avenues for innovators and fintech firms to obtain assistance, which can be accessed through the IFWG’s website, www.ifwg.co.za.
- The Regulatory Guidance Unit provides a single point of entry for innovators to submit enquiries and resolve specific questions relating to regulation, eliminating the need to contact numerous regulators, as the this unit will combine the perspectives of the various regulators in relation to the specific issue. The Regulatory Guidance Unit has dealt with questions such as “what licence does my company require to launch a mobile money wallet”, “what are the legal requirements relating to a crypto linked entity” and “what regulations do I need to follow if providing crowdfunding services and what licence can I obtain”? Enquiries can be submitted via the website https://www.ifwg.co.za/regulatory-guidance-unit/.
- The Regulatory Sandbox provides a space for safe experimentation where innovators can test new products and services that push the boundaries of existing regulation under the supervision of relevant regulators. To participate, market innovators must apply to the Regulatory Sandbox and must meet certain criteria to be eligible. The application form can be downloaded from https://www.ifwg.co.za/regulatory-sandbox/. The Innovation Hub’s website indicates that the application period for the inaugural cohort of the Regulatory Sandbox is currently open and will remain open until 15 May 2020. Accepted applicants will be informed by early June 2020, and testing is expected to begin on 1 July 2020.
- The Innovation Accelerator provides an environment where financial sector regulators can learn from and work with each other on emerging innovations in the industry. Outcomes of these coordinated efforts will be shared on the Innovation Hub website. The latest reports can be accessed at https://www.ifwg.co.za/innovation-accelerator/.