The highly-anticipated Conduct of Financial Institutions (COFI) Bill is set to have major ramifications across several industries.

Although the Bill is unlikely to be tabled before Parliament rises ahead of the elections on May 29 2024, marketplaces are both excited and cautious.

The Bill aims to consolidate thousands of pages of disparate financial legislation and create a single standard of industry conduct.

This will impact financial institutions, such as banks, insurers, credit providers, and financial advisors, and non-financial institutions, like retailers, fintech, telcos and other organisations providing financial services.

“A lot of work and consultation has gone into this legislation with a number of work streams closely examining the existing institutional legislation and the impact of the new law,” said Mpho Sadiki from Network International.

“It gives regulators the scope to govern institutions based on their activity. With the introduction of the Bill, the conduct of every institution that participates in the provision of any financial service product will fall under the oversight of the regulator.”

Although some in the industry have expressed concern over the additional regulatory burden, Sadiki said this was an incorrect way of looking at things.

Instead of a current sectoral approach, where 13 separate laws are applicable to licenced institutions, COFI provides for an activity-based approach.

This means that all similar activities will be uniformly regulated and supervised, irrespective of the type of institution performing the activity.

“COFI is a big deal because it removes the limitations of who can provide services, opening up participation and injecting some much-needed competition and innovation into the industry while still ensuring the industry guards against fly-by-night outfits,” Sadiki added.

“By creating a level playing field, the legislation allows for rapid deployment of new products that can only benefit the local consumer.”

More competition

The new Bill is also expected to boost financial inclusion, with the new instant payment system PayShap a prime example of how COFI will deliver immediate benefits.

“Vision 2025 (the SARB’s goal to increase electronic payment literacy) speaks about the need for better financial inclusion. For this to reach scale, we need to quickly create access to more financial products – and this requires competition.”

“We have gone on this journey of modernising payments and building this brilliant capability that is able to facilitate instant payments.”

“But right now, only registered banks can participate. With COFI, more than just the banks can get involved to originate and receive payments, driving competition in the market and benefiting the consumers and building trust in the entire financial system,” he said.

This more inclusive approach is expected to help South Africa transition to true “open banking.”

“COFI stands to offer our industry far more opportunities than whatever inconveniences may come with revised or new regulations.”