Global investment in fintech ventures has tripled over the last five years and will double again to an estimated $6 billion by 2018, according to a recent report by Accenture and the Partnership Fund of New York City. This growing industry clearly carries significant potential for boosting the local economy and needs to be nourished as far as possible.
The Hello Group understands regulation. Back in 2010 when the Group initially launched a SIM card for migrants to call their loved ones all across the world, it could not have done so if it did not hold a licence as issued by the telecoms Regulator, ICASA (Independent Communications Authority of South Africa). Three years later, we wanted to offer our customers an international remittance offering and it was perfect timing as the South African Reserve Bank had just issued new regulations making it easier for independent money operators to enter the market.
The company was involved in engagement with the regulatory authorities when the regulations were still fairly new. Hello Paisa, the Group’s international remittance offering was the first recipient of an “independent money transfer operator” license which allows the Group to offer its customers an instant, cheap and legal way to send money home.
It was ground-breaking to see that the Reserve Bank was so proactive in implementing new regulations and this is extremely encouraging in terms of growth prospects and innovation in the financial services industry.
Prior to the change in the regulatory environment, migrants working in South Africa were forced to use informal and illegal channels in order to ensure that their hard earned cash was sent back to their families at home. The illegal process meant it was expensive, there was a lack of transparency around pricing and inevitable delays in transferring of funds.
The regulations have paved the way for a healthier, more transparent environment where consumers are able to access a service that is transparent and offers the advantage of money being immediately available to recipients in other countries. Our shortest transfer time is literally two seconds to send money across the globe.
Looking globally, the development of the fintech industry is a key driver in the financial services market. However, as with all new developments in any field, the key to a smooth progression is a “meeting of the minds” between regulators and techpreneurs. For example, in Singapore, the Monetary Authority of Singapore created a regulatory sandbox in June this year. This essentially allows fintech companies to experiment with possible solutions/products for the market, carry out due diligence on their projects and then discuss a way forward in terms of regulatory requirements where it is less clear whether particular FinTech solutions comply with regulatory requirements or poses unacceptable risks.
The danger of a regulatory authority that is reluctant to adapt regulations to better embrace new technology is that this could lead to techpreneurs taking their ideas to friendlier jurisdictions. A further danger is that of international fintechs from more regulatory-friendly jurisdictions stealing the march on local companies. We could end up with a situation where foreign fintechs simply use the internet to offer their services and bypass local regulators. A clear example of this is the fact that Whatsapp offers VOIP (voice over internet protocol) telecom services in SA without a license. In line with this thought, it is extremely encouraging that the Reserve Bank has made it clear that it is open to ideas and very supportive of the country’s burgeoning fintech industry.
- Ahmed Cassim, chief commercial officer at Hello Group