The financial technology (fintech) sector is considered the “Wild West” of the tech industry and the most innovative. The sector is disrupting the financial order and the financial establishment is afraid of the new upstarts. At the same time fintech, through cryptocurrencies, is perceived to be enabling criminality which gives authorities sleepless nights. To take care of this chaos the South African fintech ecosystem is getting its house in order.
In the last few days the industry launched the Fintech Association of South Africa (Finasa). According to one of the association’s co-founder, Andres Perez, the formation of the association was inspired by the need to understand who’s who in the industry. This is important considering there are shady characters in the sector.
The association is also designed to ensure that players within the industry can network and collaborate. In addition, the association has been formed to address the problem of miscommunication between regulators and the industry. According to Perez the industry needs to better understand from authorities “what is legal and what is illegal”. The association would assist members to have a better way of understanding the legal framework as it is being developed.
This step by the fintech sector is also designed to ensure that there’s an organised structure for the industry. It is important for authorities to know who to talk with about industry issues. Finasa’s website indicates that the association’s aim is to create a conducive environment to stimulate innovation in the sector by increasing access, transparency and having a voice with regulators.
This is critical for the industry that is new and misunderstood. The existence of an association will go a long way in addressing some challenges that exist within the industry.The launch event which was hosted in Cape Town was supported by Visa and other leading financial organisations.
Judging by the types of organisations that were present during the launch it’s clear to see that the association will play a critical role in marrying the traditional financial industry and new players who are mainly fintech entities. Fintech startups have long been seen as a threat and disruptor by the financial establishment. The presence of organisations such as Investec and others at the launch event is an indicator that there’s an appetite by the establishment to play in the fintech space. Finasa it seems will play a critical role of bringing the financial establishment closer to the fintech players and thereby get them to have a share in the industry.
Although the association will enable the community to join next month, industry players like Mastercard,Luno, Paystack and Flutterwave are already showing their support for the creation of the organised structure.
The launch of the association took place a few days after the South African Reserve Bank (SARB) had indicated plans are afoot to regulate the sector. A move that seems to be welcomed by the community. SARB wants to create a regulatory environment that will make digital currency safer.
Speaking about the motivation behind this move, the Deputy Reserve bank governor, Kuben Naidoo, had this to say “the use of crypto for money-laundering and other illicit activities is a source of concern. 90% of transactions involving crypto-currency in the US are for the purchase of opioids or gambling tokens”.
The fintech community should be commended for getting its house in order. The next important task should be the education of communities about fintech.
Throughout the history of technology there’s nothing that has come close to fintech (particularly cryptocurrency space) in terms of confusion. Most people know very little about cryptocurrency as a result this enables criminals to fool people.
Even some of the smart people around are struggling to understand crypto. The association should prioritise a project that will create awareness about crypto.
This education programme should include everyone and that is regulators, government leaders, business leaders and learners at schools.
In future, South Africa may have a digital currency which may pave a way for a digital currency across the continent. The formation of an association is critical in making a digital currency a reality. Now it’s time to educate society about the value of this digital economic layer.