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South Africa’s Financial Sector Conduct Authority (FSCA) has released its policy recommendations for open finance, setting out a vision for a regulated ecosystem in the country.
Following a set of consultations and stakeholder engagement, the FSCA has unveiled its plan to implement open finance.
The highly anticipated policy document marks the first comprehensive open finance policy outline for South Africa. It joins others on the continent that have made moves in this field, such as Nigeria, whose central bank implemented open banking operational guidelines in March 2023.
“The regulator wants to start off voluntarily, but has told the Reserve Bank that there will need to be some legislation to get this off the ground," said Kat Cloud, director for open banking compliance at financial data company Envestnet Yodlee. “This extends beyond just day-to-day bank accounts."
The FSCA has put forward seven recommendations aimed at shaping the landscape of open finance.
These include the establishment of a regulated open finance regime, implementing tailored regulatory oversight over participants, and ensuring explicit informed consent for the use of customer data.
The FSCA has said that a regulated open finance regime will “require careful consideration of complexity and costs”, allocating the costs of the regime, including those related to consumer consent, data exchange and infrastructure setup.
According to the regulator, considerations in designing a mandatory open finance regime involve determining which entities are obligated to share data, and whether data portability is a universal right or applies solely to larger entities.
It also said it will need to define access to data and its permissible uses, specifying the types of data to be shared, extending coverage across sectors such as banking, insurance and asset management. And it noted the need to ensure reciprocity in data sharing, effectively delineating between primary and value-added customer data.
The FSCA has also said that risk management and disclosure frameworks need to be developed and suggested that data protection and sharing standards need to be set.
The regulator also wants to enhance consumer awareness about open finance along with available recourse mechanisms, and establish an advisory group dedicated to open finance matters.
"The regulator has cited a strategy akin to the UK and also Australia, with a stronger emphasis on financial services,” said Cloud.
She added that South Africa is considering broader aspects such as investments and even telecommunications, although this latter sector is not regulated by the FSCA and so its inclusion would need to be administered separately.
The FSCA’s plan states that it expects to progressively implement its recommendations between October 2024 and December 2026.
