The Competition Commission has stressed the importance of allowing mobile networks access to the national banking system.
In a paper titled “Competition in the Digital Economy”, the Commission outlined the importance of creating regulation in a variety of industries, including finance, telecoms, and ecommerce.
It suggested that all parties should work together to improve the digital economy.
“Banks, mobile network operators and the private financial sector role-players should begin the relevant innovations and product offerings that will deliver a cashless future for South African consumers,” the Commission said.
“However, South Africa’s regulatory framework has not always achieved this balance, as has been the case concerning mobile money operators and their attempts to access the payment system.”
It said that mobile money operators in South Africa constitute as non-banks, which means they cannot settle and clear payments and must be sponsored by a registered bank to operate.
The Commission said that this constrains the ability of mobile operators to compete with banks, as they rely on their infrastructure and incur increased costs.
Conflicts of interest
The Commission interviewed major players in the banking and telecoms industries and confirmed there were significant conflicts in the mobile money sector.
“Stakeholders interviewed during the Commission’s banking inquiry noted that there were conflicts of interest between banks and mobile money operators which made such joint ventures difficult,” the Commission said.
“The current review of the payment system regulation should consider how best barriers to entry can be lowered, whilst continuing to guard against systemic risks.”
However, it noted that the regulatory design for the inevitable competition arising from the entry of tech players must be ‘appropriate’, it said.
“To prevent systemic risks, regulation should put the relevant ‘walls’ to manage potential harm if commercial and banking functions are blurred.”
“It should be noted that regulating part of the market whilst ignoring a significant portion which poses a systemic risk, namely fintech and big tech, is the real systemic risk. Capturing these functions through regulation would enable better oversight and prevent shadow banking.”