Fintech policy that is adopted should be geared towards financial inclusion, members of Parliament have heard.
On Wednesday, representatives from Treasury and the Prudential Authority briefed the Standing Committee on Finance on fintech and its role in supporting financial inclusion.
Fintech, or financial technology, is new technology used to improve the delivery of financial services.
National Treasury's 2011 policy paper 'A safer financial sector to serve South Africa better' points out that new technologies and innovative approaches to reduce costs and broaden access to financial services have benefited South Africans who previously did not have access to financial services.
An Intergovernmental Fintech Working Group has been set up, and includes representatives from Treasury, the SA Reserve Bank, the Financial Sector Conduct Authority, and the Financial Intelligence Centre, among others, who are working to put together a policy for fintech and innovation in the financial sector, MPs heard.
According to Treasury, fintech has the benefit of providing consumers with access to financial products, offering greater flexibility, speed of delivery and services and competitive pricing.
Treasury noted that fintech innovations should not create an un-level playing field to negatively affect competition – and considerations should be made to ensure consumers understand the financial products available.
Although fintech can bring down costs and broaden access to financial services, it is not a "quick fix" solution for financial inclusion, according to Treasury.
To ensure that fintech is supportive of financial inclusion, there are three provisions to be made by policy.
The first relates to effective consumer protection oversight. A policy supporting fintech should be aware of the risk of excluding those who are digitally less literate or who do not have access to digital platforms, Treasury explained. Regulators must ensure that the financial products and services are appropriate to the needs of markets. Security measures must also be in place to safeguard against threats which may rise because of innovation such as fraud, according to Treasury.
The second provision relates to consumer education of the digital age – consumers need to be aware of their rights and responsibilities as they engage with financial service providers. Fintech presents an opportunity to "harness" new technologies to improve consumer financial education and awareness, according to Treasury.
Thirdly, there must be regulation – there must be coordination between policymakers, central banks, financial supervisors, regulatory authorities and financial ombudsmen, MPs heard.