The pandemic affected the global FinTech community in various ways. Some of the new emerging markets, such as Latin America saw a capital decline, while Africa raised more capital. Africa’s FinTech market is growing and developing and, therefore, significant to talk about.
FinTech industry’s development
Africa has a growing population, rising smartphone ownership, and dropping Internet costs — all contribute to the growing and developing FinTech market. In South Africa, almost all people have regular access to the Internet, and ~70% of the people have a bank account.
The South African Reserve Bank (SARB), in collaboration with several other government agencies, has created a base — support mechanism for South African FinTech by establishing a new FinTech innovation hub in 2020. The FinTech ecosystem is well-diverse — InvestTech and InsurTech startups take up a large part of the market. The industry also sees an increasing number of initial coins and brand-new locally incorporated cryptocurrency exchanges.
South Africa’s CBDC
At the end of May 2021, the SARB issued a press release on plans to conduct a feasibility study for a general-purpose retail central bank digital currency to be complementary to cash. The objective is to understand how the issuance of a CBDC will fit into the SARB’s policy position and mandate and to experiment across different emerging technology platforms. The study will be concluded in 2022.
At the same time, Project Khokha is focusing on the settlement of high-value transactions at the wholesale level. The SARB expects that the two studies will result in better policy alignment and cooperation.
Who regulates the industry?
The SARB regulates the payment system industry. It has mandated the Payment Association of South Africa (PASA) to oversee the participation of banks and non-bank players in the payment system. At the end of last year, the Deputy Governor of SARB indicated that “Unlike the core players in clearing and settlement that are highly regulated, FinTechs may have ‘light touch’ or no regulations applied to them.” This means that regulators and regulations, in general, are a challenge in South Africa; however, they are acknowledging it and working towards an improved regulatory structure.