ABSTRACT
A regulatory sandbox is an emerging approach used by financial sector regulators worldwide to respond to the rapid emergence of financial technologies (FinTech). In South Africa, the Intergovernmental FinTech Working Group launched its regulatory sandbox in 2020 and at the time of writing in 2021, seven firms had been permitted entry. While a regulatory sandbox may offer several promises, it may have adverse outcomes if the necessary conditions for successful implementation do not exist. Against this backdrop, this study seeks to determine if South Africa was ready to adopt a regulatory sandbox by exploring whether the necessary conditions for its implementation exist. The study triangulated results of interviews with individuals with secondary data to reach conclusions. The results show that a regulatory sandbox is an appropriate approach to FinTech regulation in South Africa, as most necessary conditions do exist. However, conditions that are not in place require remediation through appropriate interventions.
Acknowledgements
The authors acknowledge the participants’ contributions that acquiesced to participate in this study, without which this study would not have been possible. Participants were guaranteed anonymity in terms of ethical clearance granted by the affiliated institution and therefore are not acknowledged by name.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
1 See Ahern (Citation2020) for a review of the trend in the adoption of regulatory sandbox.
2 A cohort-based approach refers to the regular admission of a group of participating firms in the regulatory sandbox.
3 The World Economic Forum determine the maturity of the financial system based on the following criteria: (i) financial sector depth including domestic credit to private sector (% of GDP), financing of SMEs, venture capital availability, market capitalization (% of GDP), insurance premiums (volume to GDP), and (ii) stability: soundness of banks, non-performing loans (% of gross total loans), credit gap (%) and bank regulatory capital ratio (% of total risk-weighted assets).