Regulation in Africa remains a challenge to cross border banking transactions as a raft of requirements the must be complied with, end up driving costs higher, an official from key industry player BankservAfrica said on Thursday.
BankservAfrica is South Africa’s largest automated clearing house, which has over the last four decades provided interbank switching, clearing and settlement services to domestic banks and is now looking to do the same elsewhere on the continent.
But many cross border banking solutions remain expensive to African consumers, resulting in the majority still preferring to informally move actual cash across borders, BankservAfrica’s Scott Rossouw said on Thursday.
“Regulation is a big issue in the cross border space because the cost of regulation is very high from a banking perspective or the end competitor perspective,” Rossouw told the African News Agency on the sidelines of the fourth annual cross-border remittances and money transfers conference hosted by Trade Conferences International.
“Regulation requirements are quite high in terms of requiring the FICA (Financial Intelligence Centre Act) information. FICA require reporting, the financial surveillance department in South Africa requires reporting , there’s certain other financial surveillance departments in countries that require their reporting, there’s balance of payments reporting.”
“As long as everybody is expecting their own piece of regulation and requirement, then it puts a burden on the banks, and that burden on the banks just has a ripple effect down to the consumer ,” Rossouw added.
“So the consumer ends up paying for the compliance officer, for the rules and regulations, for the additional people for over-the-counter management of the paper.”
He urged regulators to looking at how to lessen this burden without the risk of fraudulent activities.
Another challenge for the sector was a lack of financial literacy, with more than 95 percent of payments in some regions in Africa still being made cash, Rossouw said. This was lower at 30 – 40 percent in South Africa and Kenya.
“It goes back to financial literacy, if you can educate people to show them that there is a better way. But that better way needs to be effective and needs to be efficient, and they need to be able to trust it,” he said.
“If they don’t trust it, they’re not going to move off of cash.”
BankservAfrica says South Africa’s national payments system, while up to global standards, needs modernisation to reduce the gap between people that have access to the banking system and those that have not, or are “financially excluded”.
“If we can take the learnings and modernisation journey that South Africa is on, and extrapolate that out … that then creates more financial inclusion and more volumes through this payment system, and the more volumes you get through the payments system, the more trust you get from the consumers,” Rossouw said. (via African News Agency)