Twenty-five years of regulating South Africa’s non-banking financial services sector is coming to an end for the FSB. However, this certainly does not spell an end for the regulation of the industry and protection of consumers. The establishment of the FSCA under the Twin Peaks model of financial regulation, a transition both industry and consumers of financial products and services in the non-banking sectors should something to get excited about.
We live in a world that is rapidly changing and becoming largely digitised, leading to a clear impact on the culture of service delivery and consumption. This could potentially lead to service and product enhancements or re-design, aggressive promotion, and changes in the nature of interaction between service providers and consumers and more specifically, consumer experience. Structural changes are inevitable, including new operating models that permeate all aspects of the financial services.
The insurance industry is a prime example of such changes. According to Avanade research, eight in 10 (80%) respondents in insurance organisations said that they achieved their customer experience gains by upgrading and/or adopting a marketing technology platform. This is a natural progression considering the consistent rise in smart technology usage.
South Africa has the largest number of adults owning smartphones on the African continent, and the number of South Africans actively accessing the internet grew by 1.9m from 24.9 million in January 2015 to 26.8m in January 2016. These numbers show no indication of slowing down.
While this trend brings great opportunities for increasing access to appropriate and affordable financial products and services, it also presents certain challenges in terms of the risks that consumers may encounter when they begin to engage and interact with financial services providers via online or mobile platforms.
Cybercrime and online fraud is one such threat, but financial technology innovations can also present challenges around issues like data protection, effective disclosure, clear accountability for customer outcomes and fair risk sharing.
Understanding current and future trends and the speed with which the environment around us is changing, we are compelled to become pre-emptive of industry developments that may put consumers at risk; be proactive in dealing with potential risks associated with such trends in transactions and lastly, for us to be forward-looking to enable us to continuously innovate to positively heighten efficiency in serving consumers and the industry alike. These are three cornerstones of the FSCA that will be ushered in during 2017.
The FSB’s transition into the new regulatory entity puts consumer protection at the centre of its implementation while closely and constantly managing risks. The main thrust of the forthcoming transition is the Treating Customers Fairly (TCF) framework, the regulatory and supervisory approach designed to ensure that specific, clearly articulated fairness outcomes for consumers of financial services products are delivered by regulated financial firms.
Under the current system, consumers have had to resolve very challenging disputes with financial services providers after the fact, while under FSCA, the market should see lesser consumer dispute resolution cases. The pre-emptive approach will see identification of probable consumer issues before they manifest, then proactively address them which ensures a smoother functioning of the institution and far greater peace of mind for the consumers.
In its mandate of the protection of consumers which will be embedded into the supervisory approach of the future, the FSCA must take cognisance of rapid technology advances made in the recent past and meet the challenges posed as a result.
Consistent with the approach the FSCA will discharge in carrying out its mandate is the requirement for efficiency, encompassing the staff complement and systems that are robust to support its vision.. The FSB is working tirelessly to ensure a smooth transition to the FSCA. To this end, the regulatory strategy committee (RSC), established to support the executive committee in facilitating a smooth transition, is identifying recommendations and transition proposals for the optimal future organisational design and structure of the new authority.
Running concurrently is an internal process, driven by the understanding that current employees will be newly employed by the FSCA. The necessary change management processes, propelled by the RSC, will assist staff to evolve and entrench themselves with the operations and functioning of the new entity.
With the shift to the FSCA in sight, it is business as usual at the FSB as we move towards a new model which will further enhance the integrity of the financial services industry while protecting consumers. It’s what South Africa needs to remain at the forefront of accepted global regulatory standards and to ensure that consumers are adequately protected.
