Fin­tech may bring bet­ter and cheaper ser­vice in your bank­ing

The Star Early Edition - - COMPANIES - Ka­belo Khu­malo

FI­NAN­CIAL tech­nol­ogy (Fin­tech) may im­prove cross-bor­der pay­ments, in­clud­ing by of­fer­ing bet­ter and cheaper ser­vices and low­er­ing the cost of com­pli­ance with anti-money laun­der­ing and com­bat­ing the fi­nanc­ing of ter­ror­ism reg­u­la­tion.

This is ac­cord­ing to the In­ter­na­tional Mon­e­tary Fund’s (IMF) Fin­tech and Fi­nan­cial Ser­vices: Ini­tial Con­sid­er­a­tions lat­est re­search pa­per re­leased this week. The IMF said the fi­nan­cial ser­vices sec­tor was poised for change. But it was hard to judge whether this would be more evo­lu­tion­ary or rev­o­lu­tion­ary and that pol­icy mak­ing would need to be nim­ble, ex­per­i­men­tal, and co-op­er­a­tive.

“At the same time, reg­u­la­tory author­i­ties need to bal­ance care­fully ef­fi­ciency and sta­bil­ity trade-offs in the face of th­ese rapid changes. They need to be as­sured that risks to sta­bil­ity and in­tegrity – in­clud­ing from cy­ber at­tacks, money laun­der­ing and ter­ror­ism fi­nanc­ing – can be ef­fec­tively man­aged with­out sti­fling in­no­va­tion,” the IMF said.

Fi­nan­cial in­clu­sion is a ma­jor con­cern across sub-Sa­ha­ran Africa as a stag­ger­ing 350 mil­lion adults in the re­gion are un­banked, ac­cord­ing to data in 2014.

Fin­tech hub

And South Africa is of­ten seen as an African fin­tech hub with many start-up com­pa­nies hav­ing been es­tab­lished in the last few years. It has giv­ing rise to small busi­ness so­lu­tions like Rain­fin backed by Bar­clays bank, which is cur­rently the largest peer-to-peer lend­ing busi­ness in South Africa with trans­ac­tions of more than R1 mil­lion per day.

Ben­sam Solomon, a re­search as­sis­tant at In­ter­na­tional Fi­nance Cor­po­ra­tion, said the pace of the fin­tech in­dus­try in sub-Sa­ha­ran Africa is some­what dic­tated by ex­ist­ing mo­bile net­work op­er­a­tors and their re­la­tion­ships with cen­tral banks

“South Africa’s well-reg­u­lated bank­ing sec­tor and ag­gres­sive dig­i­tal bank­ing roadmap are al­ready de­vel­op­ing its own sys­tem of in­no­va­tive fin­tech so­lu­tions, which rep­re­sents a ma­jor en­try bar­rier for ven­ture cap­i­tal-backed fin­techs,” Solomon said.

The IMF said fin­tech firms had at­tracted sub­stan­tial in­vest­ment in re­cent years glob­ally, while pub­lic in­ter­est had grown sig­nif­i­cantly.

Most firms had re­mained small – re­flect­ing their knowl­edge based busi­ness model – but in­vest­ment in them has risen sub­stan­tially. To­tal global in­vest­ment in fin­tech com­pa­nies re­port­edly in­creased from $9 bil­lion (R117.57bn) in 2010 to more than $25bn last year. Ven­ture cap­i­tal in­vest­ment has also risen steadily, from $1bn in 2010 to $13.6bn in 2016.

The IMF said while fin­tech was bring­ing new peo­ple into the bank­ing sys­tem, in­ter­na­tional co-oper­a­tion will be im­por­tant to off­set risks posed by the tech­nol­ogy which in­cludes its ap­pli­ca­tion, trust, mon­e­tary pol­icy trans­mis­sion, fi­nan­cial sta­bil­ity and if it un­der­mines com­pe­ti­tion.

“Fin­tech is an in­ter­na­tional is­sue. With the blur­ring of bound­aries among en­ti­ties, ac­tiv­i­ties, and ju­ris­dic­tions pol­i­cy­mak­ers need to con­sider im­pli­ca­tions for com­mon stan­dards and le­gal prin­ci­ples, to the ex­tent that they align with na­tional pri­or­i­ties.”

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