South African Reserve Bank — regtech, blockchain and robo-advisers
Sep 3, 2018 · 4 min read

I attended some of the sessions last week at the South African Reserve Bank Innovation and Cybersecurity Conference 2018 (a three day conference held at Sandton Convention Centre from 28 to 30 August). Below I share with you a few of my key takeaways from the event.
From the opening address of the Governor of the South African Reserve Bank (SARB), Lesetja Kganyago:
- SARB Fintech program: SARB launched a fintech program late-2017 to identify and address regulatory gaps in fintech market activities, including in the areas of cryptocurrency, innovation facilitators and distributed ledger technologies (DLTs). Following the launch of the fintech program the SARB held the Intergovernmental Fintech Working Group outreach workshop during April 2018, and released a detailed report during July 2018.
- Virtual currency position paper 2014: a review of the 2014 position paper is currently underway taking into account the insights gained by the SARB over the last few years, including new business use cases and technology and the potential benefits and risks of private cryptocurrencies that have emerged. It will be “updated in due course”.
- Innovation facilitators: globally regulators have concluded that new entrants and new business processes in financial services have the potential to fundamentally change traditional financial services offerings. The SARB is currently investigating how to embed an innovation facilator into its operations. It is assessing innovation hubs, accelerators and regulatory sandbox models.
- Project Khokha: on 5 June 2018, the SARB conducted a live demo and shared the results of its DLT project for interbank payments settlement in South Africa. For more information see the Deputy Governor’s speech and the report.
- Central bank digital currency: There are still many fundamental policy questions and things to take into account, such as practical, legal and regulatory considertaions, before a central bank digital currency could be a reality.
- Cybersecurity challenges: SARB is aware of these threats and are taking this challenge head on. Given the rapidly developing world we live in, traditional risk mitigiation strategies are no longer good enough to deal with cyber threats.
- The Governor ends his address with the SARB motto: “Learn, Leverage, Legislate.”
Other interesting takeaways:
- “Smartphones are the game changer for payments. We still haven’y fully utilised smartphones. Today, everyone is conneted to everyone all the time.” — Chris Hamilton, CEO, BankServ.
- Robotics Process Automation: RPA aims to automate basic, programmable tasks to leave humans to do more fulfilling work. According to Jonas Bogoshi, CEO at BCX, they have already implemented systems internally to automate mundane tasks for its employees to free up their time.
- Data science: BCX has trained 100 data scientists in 2018 and aims to train another 200 in 2019, according to CEO, Jonas Bogoshi. The Governor asks what are the universities doing in response for this demand for new technology skills like data science.
- Data privacy: Banks want to leverage data to help customers with their money and be more proactive in managing money, for example, suggesting that they should spend more on retirement savings, according to Raj Makanjee, CEO: FNB Retail and Private Banking. Nicky Newton-King, the CEO of the JSE, mentions that “privacy” has different meanings to different generations. Information that she would consider private, is easily shared by her children.
- Technology education: we are living in the knowledge economy. Education in technology is a key enabler. However, Chris Hamilton, CEO of BankServ, says we need to fix data availability first. With widespread, availability of cheap data we will have an explosion of learning in South Africa. Nicky Newton-King, CEO of JSE, says we need to get people learning about the fourth industrial revolution at school.
- “Banks have enough money to buy all the bitcoin in the world and kill crypto just like that. Banks are in it for the money. A bank looks at a customer and just sees money. However fintech (startups) want to solve problems and sees people, not just money.” — Mitchan Adams, CEO, i-Pay (Fintech startup).
- RegTech: Regulation Technology is not a new discipline. It is described as the use of technology to enable more efficienct and effective compliance with legislative and regulatory requirements, according to Eugenie Krijnsen, PwC Netherlands. She says that if you think compliance is expensive, try non-compliance!
- Robo-advisors: According to Caroline da Silva, the Ombudsman has received a complaint against an insurance robo-advisor. The robo-advisor failed to obtain all the relevant information, failed to identify if product was appropriate, didn’t follow protocol to replace products, and failed to provide special terms or waivers.
- Cybersecurity: the hackers are ahead of us. We are already using automation to fight hackers and criminals. There is both great opportunity and risk from AI. It is the greatest tool for threat prevention and detection, and assists in cutting down on hacks and breaches. However, “bad AI” is increasingly difficult to defend.
It is promising to see a regulator taking an innovative approach to regulation. Looking forward to receiving the updated position paper on virtual currencies and further engagement with the Intergovernmental Fintech Working Group.
