COFI Bill expected to radically change SA’s fintech sector

  • South Africa’s fintech services sector is set to be altered should the Conduct of Financial Institutions (COFI) Bill make it into law.
  • The Bill looks to consolidate a number of disparate financial legislations into one unified industry standard.
  • According to Network International’s Mpho Sadiki, this will bring all financial institutions under the remit of one regulator.

South Africa has one of the most diverse and intriguing fintech sectors in the world, with its maturity far surpassing many other business segments in the country. This sector could change significantly, however, as the Conduct of Financial Institutions Bill (COFI) is expected to radically impact how financial institutions operate should it find its way into law.

The COFI Bill seeks to consolidate thousands of pages of disparate financial legislation and create a single standard of industry conduct.

As such, it will impact all financial institutions, including banks, insurers, credit providers, and financial advisors, as well as non-financial institutions such as telcos, retailers, fintechs, and any other organisation providing financial services in South Africa. 

When that will happen remains to be seen, as it likely will not make it before political decision makers given that the 2024 national elections are fast approaching.

That said, the potential impact it will have is unavoidable, as Mpho Sadiki, Group MD of Merchant Solutions (Africa) at Network International explains.

“A lot of work and consultation has gone into this legislation with a number of work streams closely examining the existing institutional legislations and the impact of the new law. In essence it gives regulators the scope to govern institutions based on their activity. With the introduction of the bill, the conduct of every institution that participates in the provision of any financial service product will fall under the oversight of the regulator,” the Group MD notes in a release shared with Hypertext.

He is also quick to acknowledge that there has been some resistance to the COFI Bill, especially as many financial institutions are unwilling to jump through further regulatory hoops should there be any.

Countering this, however, Sadiki says COFI would remove, “The limitations of who can provide services, opening up participation and injecting some much needed competition and innovation into the industry, while still ensuring the industry guards against fly-by-night outfits.”

“By creating a level playing field the legislation allows for rapid deployment of new products that can only benefit the local consumer. The organisations most likely to benefit from this new environment are those who have access to technology partners who can enable rapid, low-risk deployment to take advantage of opportunities as soon as they arise,” he continues.

To illustrate his point, Sadiki points to the recent rollout of PayShap as an example of how a unified standard can lead to tremendous benefits for South African citizens, particularly those who have had trouble accessing services in the past.

“Vision 2025 speaks about the need for better financial inclusion. For this to reach scale we need to quickly create access to more financial products – and this requires competition. We have gone on this journey of modernising payments and building this brilliant capability that is able to facilitate instant payments. But right now, only registered banks can participate. With COFI more than just the banks can get involved to originate and receive payments, driving competition in the market and benefiting the consumers and building trust in the entire financial system,” he posits.

“South Africa has a mature and excellently regulated financial services sector. By levelling the playing fields and moving towards an activities-based regulatory regime we are preparing an environment that is primed for more innovation,” Sadiki concludes.

With the fintech sector being one of the shining lights in South Africa’s business landscape, it will be interesting to see whether the COFI Bill can further development in the space.

[Image – Photo by Scott Graham on Unsplash]


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