Regulatory sandbox for FinTech regulation: Do the conditions for effective adoption exist in South Africa?

Abstract

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.