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Will South Africa Regulate Open Banking? A Glimpse Into the Future.

Today, more than 60 countries have taken a regulatory approach to open banking.1 These countries, including the UKEU, and Australia, mandate that consumer-permissioned financial data be shared between banks and authorised third parties through established application programming interfaces (APIs). 

While South Africa open banking isn’t regulating open banking yet, there are signs the country is headed in that direction. South Africa’s Financial Sector Conduct Authority (FSCA), responsible for market conduct regulation and supervision, published a Draft Position Paper on Open Finance in June 2023 which recognises the importance of regulating open finance. 

The FSCA is aiming for an approach to open finance that drives sustainable innovation, financial inclusion and competition while protecting consumers, and is considering input from financial institutions and third-party providers before publishing their final position paper – due in April 2024. Once the paper is finalised, the FSCA plans to implement regulatory proposals in phases.

South Africa’s National Treasury is also committed to increasing financial innovation to improve competition and inclusion. Their 2024 Budget Review document, published in February, emphasizes that the “government is taking steps to promote the adoption of digital payments, which will help to improve the lives and livelihoods of marginalised groups.”

The National Treasury’s goal is to support small and informal businesses through payments innovation and four planned digital payments pilot projects implemented from 2024 to 2027, which will be focused on community digitalisation, digitising informal and low-income worker payments, cross-border remittances, and cross-border trade. 

The Treasury’s Budget Review notes that pilot projects will include financial service providers involved in specific markets and target a combination of new entrants or smaller providers and larger, more established service providers to ensure scalability.

At Envestnet® | Yodlee®, we’ve seen how open banking APIs align with these goals. Open banking-enabled APIs can facilitate streamlined, standardised payment methods that lower transaction costs and enhance data protection measures.2 These APIs can enable third-party service providers to initiate payments from a user's bank account without requiring a credit card or other payment intermediary. 

Open banking partnerships also enable banks and FinTechs to collaborate on innovative new payment solutions, customise payment experiences, and access alternative credit data to extend financial services and products to consumers with limited or non-existent credit histories. All of which could significantly revolutionise South Africa’s financial services industry.

Unlocking Open Banking Innovation with Envestnet | Yodlee

Today, a number of FinTech startups and financial institutions are already creating innovative products and services supported by open banking APIs in South Africa.3 By partnering with an experienced leader in data aggregation and intelligent APIs, you can join them and be ideally positioned for the future of open banking. Whether it’s regulated or not. Reach out to us to learn how.