Regulations should allow mobile networks to become your next bank: commission

The Competition Commission has published a paper on competition in South Africa’s ‘digital economy’ and the measures that can be introduced to promote inclusion.

The commission said that it favours a regulatory approach that promotes the inclusion of fintech and enables access to the national payments system.

Rather than protecting existing incumbents, regulation should protect the payments system for the benefit of consumers, it said.

“In this regard, the financial regulators should explore regulation that can allow non-banks such as mobile network operators to enter the national payments system; settlement and clearance system.

“In particular, financial system regulators should review the ecosystem of regulation that enables entry and participation in the system, including licencing and trading condition, data ownership, portability and system operability.”

Fintech regulations needed 

Currently, there are greater levels of regulation targeting those institutions regarded as posing a high systemic risk, that is the “too big to fail” and “too large to ignore” group of companies, and less on fintech and big tech, the commission said.

However, the commission said that fintech and big tech also tend to operate outside of traditional sector regulation: financial stability, anti-money laundering, and consumer protection.

This means that 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.”


As a digitalised world can be exclusionary for many citizens, particularly the poor, deliberate consideration of inclusion by policymakers is pertinent, the commission said.

Promoting greater inclusion of citizens in financial services is ultimately both a function of innovation and regulation, it said.

“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 challenges that South Africa has faced regarding the payment of social grants over the years have been more starkly pronounced during the current Covid-19 pandemic, as millions of citizens must collect relief grants in-person from physical pay-points.”

The commission said that solutions by firms that enable the participation of marginalised groups should, in principle, be supported through regulation.

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.

“Mobile money operators in South Africa constitute as non-banks. They, therefore, cannot settle and clear payments and must therefore be sponsored by a registered bank to operate.

“This dependency increases costs for the operator and constrains its ability to be an effective competitor with registered banks.”

Speaking to stakeholders during its banking inquiry, the commission said that there were conflicts of interest between banks and mobile money operators which made such joint ventures difficult.

“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,” it said.

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