Regulating FinTech: Lessons from Africa

Abstract

Technological innovation in finance (“FinTech”) has been on the rise in recent years, creating new challenges for regulators. These challenges vary significantly depending on the region in question and type of economy, not least because different technologies are applied to tackle different problems. This Article focuses on regulatory frameworks of two leading jurisdictions in terms of FinTech development in Sub-Saharan Africa: Kenya and South Africa. As the developments in the region cannot be analyzed in isolation from the global trends in FinTech regulation, this Article approaches the matter systematically. It starts by clarifying the existing terminology and preparing a comprehensive matrix of various challenges in FinTech regulation: in doing so, it does not take the interests of innovation promotion for granted and adopts a balanced approach, weighing various—often mutually exclusive—considerations against each other. This Article also argues that rule of law challenges, rather than technical problems, remain the key obstacles to adequate FinTech regulation. It then proceeds to discuss the specific regulatory issues in two African jurisdictions that are current regional leaders in the FinTech space—Kenya and South Africa. Finally, this Article concludes by synthesizing a set of recommendations for improving the FinTech regulatory systems in the two countries, in the light of the earlier matrix of regulatory challenges. Many findings in this Article (such as the need for improved methodology of social and economic impact analyses and various policy considerations for structuring the FinTech regulation) are relevant outside the African context and have universal application