Reserve Bank’s fintech unit set to release its first report
The South African Reserve Bank (SARB) has announced that it will soon launch a report on ‘Project Khokha’ – the first project initiated by the recently constituted Fintech Unit in the SARB.
In a statement released on Friday (1 June), the SARB said that the report will focus on the collaborative project led by the SARB and involving a consortium of South African settlement banks as well as technical and support partners.
“The goal of the project was to build a proof-of-concept wholesale payment system for interbank settlement using a tokenised South African rand on distributed ledger technology (DLT),” it said.
More details are expected, following the official release on Tuesday (5 June).
In February, the Reserve Bank confirmed that it would be launching a special unit to address regulation in the growing fintech space.
The announcement received a thumbs-up from ratings agency Moody’s as it felt that the focus on financial technology was a good move – and is credit positive for the country’s banks.
According to Moody’s, the adoption of fintech infrastructure and regulations will improve efficiency, strengthen anti-money laundering practices and increase South African technologies’ competitiveness globally.
“These are credit-positive developments for banks that will decrease their transaction costs,” the firm said.
Of the three primary objectives outlined by the SARB, Moody’s sees the experimentation with distributed ledger technologies to be the most pioneering, as the adoption of these can improve efficiencies in back- and middle-office functions.
“The cost-to-income ratio of South African banks is higher than that of peers elsewhere, with the improvements in the ratio in recent years also trailing peers. Consequently, adoption of more efficient and less costly processes will help bridge the growing efficiency gap,” Moody’s said.
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