22seven welcomes the recent appointment of the new Financial Sector Conduct Authority (FSCA) Commissioner, Unathi Kamlana, and Deputy Commissioner, Astrid Ludin. This is an opportunity for the Open Finance conversation to be at the top of the FSCA’s agenda.
Kamlana’s experience at the South African Reserve Bank and Ludin’s recent experience leading digital innovation at The Department of Trade, Industry and Competition are encouraging. We look forward to them commencing their roles in the coming months.
Open Banking, a subset of Open Finance, was first introduced through the second payment services directive (PSD2) in Europe in 2015, and later the Open Banking Order in the UK in 2018. This regulation is now making its way to Africa, as seen by recent activity from the Central Bank of Kenya, Central Bank of Nigeria and consultation papers from the Financial Services Conduct Authority (FSCA) and SA Reserve Bank. If regulators like the FSCA can enable this environment, the move to Open Finance will benefit us all.
The promise of Open Finance is that if our financial data is freed in a safe and ethical manner, it could add significant value to our lives. Imagine topping up your investment in real-time because your investment provider knows you have money in your bank account, comparing interest rates for a small business loan with no credit history, or applying for a cellphone contract without having to obtain stamped bank statements.
Before open finance can become a reality in South Africa, there is still some ground to cover:
- Customers must be educated on the existing (we have a few already) and potential value cases for open finance.
- We have to define industry standards. This includes, among other things, standards for data sharing methods (called APIs), for customer consent, for ongoing customer disclosures and for disputes.
- We have to create efficient but appropriate checks to ensure the public is protected from ill-equipped companies and bad actors.
- We have to create a level playing field for all participants to ensure that incumbents and newcomers are incentivised to compete, collaborate and contribute to the growth of the industry.
Open finance is an opportunity for our regulators to encourage the safe and ethical use of existing technology to create significant additional value for all South Africans. We could live better lives with more control of our own financial data.
- Jikku Joseph – Managing Director at 22seven