Twin peaks REGULATIONS FOR A SAFER FINANCIAL SECTOR - The Banking Association South Africa
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BANKER SA
Edition 16
EDITION 16
twin
peaks
REGULATIONS FOR
A SAFER FINANCIAL
SECTOR
PICASSO HEADLINE
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47
35
17
Contents Edition 16
Special Report Inside
17 TWIN PEAKS Looking at the Twin 06 EDITOR'S NOTE South 51 TECHNOLOGY The value
Peaks regulation model and its Africans and safety of enterprise mobility
impacts on the economy
09 MD'S MESSAGE Unpacking risk, 52 TECHNOLOGY Fintech and
23 DATA SECURITY All partners safety and security in SA disruptive technology pose
need to work together to stay a threat to traditional banks
10 TRIBUTE We say farewell to
protected in the volatile Sizwe Nxasana 54 OPINION Moving from a “me”
cyberspace environment
economy to a “we” economy
13 LOCAL AND INTERNATIONAL
27 WHY CASH NEEDS TO BE NEWS Trade deficit weakens rand,
56 OPINION Ten megatrends
PROTECTED Cash is still king, a new Development Bank, and
in the future of money
so it should be guarded Wema Bank in Nigeria goes national
39 SMEs The new POPI Bill and 58 CHILDREN AND YOUTH
31 THE DIGITAL NATIVE Are The inaugural FinLit
banks ready to meet the what it means for small
businesses Spelling Bee
needs of Generation M?
42 SUSTAINABILITY Sustainable 60 WELLNESS Companies
35 CLOUD SECURITY Looking at look at year-round approaches
banks versus traditional banks
the successful integration
of cloud services into the 47 INSIGHTS Islamic banking appeals 62 CLOSING OPINION Looking
financial-services sector to many, even non-Muslims ahead in 2016
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B EDITOR’S NOTE
South Africans
and safety Publishers: Picasso Headline (Pty) Ltd
Times Media Building
Central Park, Black River Park
Fir Street, Observatory, 7925
Cape Town 8001, South Africa
Tel: +27 21 469 2400
S
Fax: +27 86 6822 926
ome years back, I was writing Yes, the challenges of crime,
mining health-and-safety features unemployment, inequality and a bruised EDITORIAL
for Financial Mail. I interviewed economy mean that life in South Africa The Banking Association South Africa
Editorial Board
the head of a mining consulting is perceived by many as risky. Yet many Cas Coovadia
Thenji Nhlapo
firm about the industry’s safety challenges. people hold a strange relationship with Editor
He said one of the chief challenges is that the ideas of safety and security. According Tamara Oberholster
Content Manager
South Africans are a risk-taking nation. to a recent survey by Kaspersky Lab and Raina Julies
Getting mine employees to abide by safety B2B International, 43% of South Africans Copy Editor
Lynn Berggren
regulations in the workplace was difficult, believe that over-the-counter banking
he posited, when outside of work, taking transactions are safer than internet Contributors
Septi M Bukula, Cas Coovadia, Trevor Crighton,
risks is considered a natural part of life. banking, and 64% feel vulnerable when Yule Edwards, Thekiso Anthony Lefifi, Jeff Gable,
Wendy Hardy, Michael Lee, Solly Moeng, Lee
Even something as simple as walking transacting online. Yet, in spite of this, Naick, Kim Novick, Vanessa Rogers, Dumile
Sibindana, Lisa Witepski
home from work involves a measure of the majority of South African internet
Head of Design Studio
(perceived?) risk for many South Africans. users still make online payments. Of Jayne Macé-Ferguson
According to the Victims of Crime Survey those surveyed, 74% use their desktops or Designers
Anja Hagenbuch, Mfundo Ndzo
2013/14, published by Statistics SA, 47.68% laptops for online payments, 22% use their
of women and 43.76% of men in South tablets, 32% use their smartphones, and SALES
Africa feel very unsafe walking alone in 14% of smart-TV owners use their smart Project Manager
Andrew Green
their neighbourhood at night. TV for such operations. And, despite the andrewg@picasso.co.za
Sales Consultants
perception that internet banking is unsafe, Stephen Crawford, Alec Rompelman,
15% of respondents do absolutely nothing Business Manager
Lodewyk van der Walt
to protect their financial data online. lodewykV@picasso.co.za
In this edition, we put risk, safety and
security under the microscope, looking at PRODUCTION
issues ranging from the regulation of risk in Production Editor
Shamiela Brenner
the financial sector through to cybercrime, Advertising Co-ordinator
Merle Baatjes
data security, cash management and
mobile-banking risks. We highlight trends
OPERATIONS
in safety and security, and investigate Senior Bookkeeper
solutions, trying to understand what works, Deidre Musha
Subscriptions and Distribution
what doesn’t, and why. Shihaam Adams
On another note, this is my last edition subscriptions@picasso.co.za
General Manager: Magazines
as editor of Banker SA. I have loved the Jocelyne Bayer
chance to learn more about the industry
and to work on thought-provoking content
alongside The Banking Association South
Africa over the past year and a bit. It’s been
a great experience and I will remain a loyal Copyright: Picasso Headline and The Banking Association
reader of Banker SA. South Africa. No portion of this magazine may be
IMAGE: SUPPLIED
reproduced in any form without written consent of the
publishers. The publishers are not responsible for unsolicited
material. Banker SA is published quarterly by Picasso
Headline Reg: 59/01754/07. The opinions expressed are not
necessarily those of Picasso Headline. All advertisements/
advertorials and promotions have been paid for and do not
carry any endorsement by the publishers.
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MESSAGE FROM THE MD B
Risk, safety and security
funds entrusted to them by the public. As erosion or theft and fraud. Citizens also
trustees and custodians, they must utilise want to “feel” secure when interacting
those funds responsibly and put those with banks; they want peace of mind and
funds into as little risk as possible. Thus, freedom of movement.
banks must consider risk when lending There are other aspects to risk,
money, and have developed numerous safety and security. The banking sector
objective, and sometimes subjective, continually innovates to broaden
criteria to measure risk. financial-service access and lower costs.
Safety is both physical and structural.
The public expects to feel personally safe
in a bank, and they expect a bank to take
`So risk, safety and
Cas Coovadia
the necessary measures to ensure their
security are not
safety on bank premises. Banks take nebulous elements.
T
his issue of Banker SA discusses inordinate steps to ensure the safety of These are real issues
matters related to risk, safety the public on their premises, but this is for customers and
and security in the banking increasingly difficult and complex in the banks. These are also
industry. These are critical South African environment. However,
elements for the banking sector, but also, it is also incumbent on customers,
real issues for South
sadly, for the South African populace. as citizens, to take responsibility for
African citizens in
Banks stand or fall on confidence, their own safety and to demand a safe their daily lives'
trust and sturdiness. People entrust environment from government.
their funds to banks, because they are Safety is also critical structurally, Mobile banking, internet banking,
confident the bank will be there for a where banks develop complex and secure use of agents and other innovative
long time and they will get their money mechanisms to ensure the safety of the channels all respond to a customer
back when they want it. They risk their funds the public entrusts to them. South that seeks convenience, low costs and
funds because they see banks as safe African banks have established separate mobility. These are all great and banks
and secure. The fact that South African organisations, at great expense, to do this. must keep ahead of the curve to avoid,
banks have, with very few exceptions, SBV is a cash-in-transit company that or limit, disintermediation. However,
been safe, secure and stable has built has developed sophisticated vehicles and these instruments also bring with them
confidence in the populace to use the other equipment to protect cash, and the new types of insecurity, lack of safety
services offered by banks. South African Banking Risk Information and significant risk. SABRIC spends a
Let us look at each of these aspects Centre (SABRIC), a subsidiary of The significant amount of time countering
separately: Banking Association South Africa, cybercrime, which was not a factor even
Risk is often, to some, a nebulous develops sophisticated intelligence to five years ago.
concept. However, there are two sides keep a step ahead of criminals who stalk So risk, safety and security are not
to risk in the banking industry. The ATMs and use other methods to rob nebulous elements. These are real issues
customer takes the risk of entrusting his/ people of their cash. for customers and banks. These are also
her funds to a bank. Th is is important Security has physical, structural and real issues for South African citizens in
because the 2008 fi nancial crisis in the perceptual elements. The public wants their daily lives. We hope the innovation
USA and Europe eroded confidence in to be secure when doing business with in the banking industry to make the
the banking sector and some customers banks – and their physical security is environment for bank customers risk
IMAGE: SUPPLIED
may have seen banks as risky thereafter. critical. They also want the assurance that free, safe and secure will assist in
Banks also consider risk in doing their banks have the structures to secure their addressing broader risk, safety and
business. They are custodians of the assets and protect them from misuse, security issues in our society!
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BankerSA16_MD_Message.indd 9 2015/12/18 1:11 PMB TRIBUTE
Farewell Sizwe Nxasana
Tribute to former Chairman of The Banking Association South Africa, Sizwe Nxasana,
by Dumile Sibindana.
I
t is near impossible to utter the name global standards. Nxasana asserts that
Sizwe Nxasana and not marvel at his at some level The Banking Association
achievements in corporate South Africa. contributed to this achievement: when The
Having served as CEO in three different Banking Association interacts with the
industries, he has built an incredible profile various decision makers, they do so in a
in South Africa, and some may even argue unified voice, as a unified body consisting
that he’s the true yardstick of excellence of member banks within The Banking
that many young black professionals in Association, as opposed to acting in the
South Africa aspire to. interests of a single or faction of banks
In his capacity as CEO of Telkom (in the within our banking industry. This has been
1990s) his leadership was instrumental in SISWE NXASANA, former Chairman of
crucial in attaining some of the successes
the listing of the entity and the substantial The Banking Association South Africa. the Association has relished.
gains in value that the firm has achieved Mike Brown, CEO of Nedbank Group
since its listing. He turned a state-owned Limited and member of the board of
entity into a formidable ICT company. the key initiatives The Banking Association directors at The Banking Association,
After leaving Telkom, he became one of has been driving is finding ways in which had this to say to Nxasana: “Having been
the few black executives in the banking the banking sector can assist government appointed as chief executives in the same
sector when he was appointed as group in achieving the goals contained in the year, I have always watched your career
CEO of FirstRand Group. His achievements National Development Plan (NDP). As with keen interest. Under your leadership,
in the banking giant are as conspicuous our focal economic policy document FirstRand Group has trebled its market
as his passion for education and making going forward, the NDP acknowledges capitalisation, making it the largest bank
education accessible to the underprivileged. the activist stance the state has to play in South Africa by market value and
in facilitating and fostering sustained earnings. The results you have achieved in
`Nxasana was economic activity. However, government a very challenging economic environment
responsible for cannot be solely responsible for attaining speak volumes of your skill as a banker and
chairing the board what some refer to as “ambitious goals”; the demonstrate your ability as a leader. You
private sector and other institutions ought have been an asset to the South African
and, perhaps more to play their part as well by identifying banking industry and have made a lasting
importantly, fostering ways in which they can contribute to contribution to its stability and success.”
the co-operation the Vision 2030 mandate. The Banking Although Nxasana has stepped down
between various Association, under the chairmanship of from his role at FirstRand Group and
stakeholders' Nxasana, has interacted with government The Banking Association, it’s evident his
at various levels, advising on matters contribution to the banking sector will be
At The Banking Association South of policy formulation and execution, as cherished and sorely missed in the industry.
Africa, Nxasana was responsible for well as advising on matters pertaining to We, as Banker SA in association with The
chairing the board and, perhaps more regulation within the banking industry. Banking Association, would like to wish
importantly, fostering the co-operation South Africa’s banking sector is among Nxasana well in his future endeavours,
between various stakeholders in matters the most sophisticated and developed in particularly in his new role as chairman
IMAGE: SUPPLIED
pertaining to government policy, as well as the world, rivalling many in the developed of National Student Financial Aid
facilitating these discussions with decision nations. This is largely due to the regulation Scheme (NSFAS) and other educational
makers within the public sector. One of of the industry and maintenance of programmes he’s involved in.
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LOCAL BANKING NEWS B
SA lines up for Brics loan Liability
A new Development Bank, headed by South African Leslie Maasdorp as the chief
financial officer, has opened its head office in Shanghai, China. It expects to be in a
debate on card
position to start lending to BRICS nations – Brazil, Russia, India, China and SA – in
the second quarter of 2016, once a quality assessment has been carried out on
skimming
the projects they've identified as needing funds. Interest rates will be cheaper According to the Hawks, a 23%
than those charged on loans at other global financial institutions. This is good year-on-year increase was recorded
news for SA which
in card-skimming fraud to R453-
million from R366-million at the
requires funding
close of 2014. Card-skimming
for multibillion-
machines look and act like other
rand infrastructure
mobile-card machines, warns
and development Anton Meyer, Executive Head of
projects in its SHA Specialist Underwriters. The
energy and water fraudster simply clones the strip
sectors, such as and copies the CVV number. The
for two new Eskom customer is told the machine is
power stations. faulty, and the transaction is then
processed on the correct machine.
But Meyer warns that customers are
not automatically protected by their
iPads aid Absa serviceability banking institutions.
Advice to cardholders includes
migrating to a EuroPay, MasterCard
Consultants at selected Absa branches and Flexi Funeral cover, as well as their
or Visa (EMV)-compliant card,
in Gauteng will now have iPads on hand Personal Accident Plan, that much more
which generates a unique transaction
to offer legal, life and funeral cover to accessible to clients. Additionally, the Verdi code that cannot be reused,
an increasing number of clients without and Irene branches have extended their checking with retail/restaurant
being teller-based. According to Banie operating hours during the week and on managers that a faulty machine in
Claasen, Managing Executive of Absa Saturdays, says Managing Executive of fact belongs to their establishment,
in the southern region of Gauteng, their Absa’s northern region, Oscar Siziba, in a and ensuring they have a linked
use will also allow consultants ‘to carry quest to adapt instant notification service, so the
out traditional branch transactions in to customers’ bank in question can be contacted
minutes’. The iPad pilot will be rolled out changing immediately following a suspicious
at 17 branches across the province, making banking transaction.
policies like Absa Law for You, Classic Life behaviour.
Trade deficit temporarily adverse for rand
SA’s trade deficit grew to its biggest gap in October, since January 2015, as various imports –
including machinery/electronics (19% increase), vehicles/transportation equipment (45% increase)
and mineral products/oil (17% increase) – surged. The gap on the trade account of approximately
R7-billion (currently R21.4-billion, from a revised R1.3-billion in September 2015) has
consequences for the current account – the rand fell to a record low against the dollar after the data
was released. As of the afternoon of 30 November, the rand weakened 0.2% to R14.4351 per dollar.
“On balance, the trade deficit will be relatively negative over the short term for the currency,”
explains Jeff rey Schultz, economist at BNP Paribas Securities.
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Chinese bonds in
Standard Bank coffers
China, owner of Industrial and Commercial Bank of China (ICBC) and the world's second-
biggest economy, has been instrumental in supplying inexpensive loans – to the tune
of $10-billion – to African countries over the past 10 years. The Chinese nation has
benefited, in turn, by scoring oil and other raw materials from the continent, which are
Wema Nigeria necessary for use in various China-Africa projects. A new development has seen the
bank, which is China's biggest lender, sign an agreement to sell an additional R10-billion
nationalises ($687-million) worth of bonds for use in infrastructure projects in South Africa –
making ICBC the first Asian issuer of rand-denominated debt. Standard Bank Group Ltd
A regional financial institution of Nigeria, has been appointed to issue the bonds; the Group is 20% owned by ICBC.
the Wema Bank, received approval in mid-
November 2015 to change its status to a
national bank following the rise of its capital
base to $220m. According to Chief Financial
Officer Tunde Mabawonku, the bank had to
Controversial FX practice on way out?
suspend its plans in this regard in April of 2015, In mid-November, the New York State Department of Financial Services (DFS)
due to a domestic weakening in the naira when issued Barclays with a fi ne of $150-million for electronic foreign-exchange
oil prices plunged. These plans could now be misconduct. The fi ne relates to the bank’s use of the last-look practice to pull a
resumed due to a potential share sale to fund price from a platform to the detriment of its customers. While the bank claimed
growth and an additional process in which that last look was imposed on client orders to protect against stale prices and
$100m worth of Tier 2 naira bonds would latency arbitrage, the DFS argued that it appeared to be used, instead, as a fi lter
be raised locally, most likely during the first to reject customer orders likely to prove unprofitable
quarter of 2016. to the bank.
Pakistan
welcomes global
ecommerce players
TEXT: VANESSA ROGERS; IMAGES: ISTOCK, SUPPLIED
In 2014, Pakistan launched high-speed mobile internet services for its
200 million residents and the subscriber base now totals 18 million, with 21 million
people using broadband internet. This has opened the way for Pakistan to invite major
global online-payment giants – such as PayPal and Alibaba – to offer their services in the
country, the IT Ministry said in late November. Previously, Pakistan was considered high
risk for money laundering and strict regulations limited online payment for products and
services, leaving local vendors to instead offer cash-on-delivery options.
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SPECIAL REPORT B
TWIN PEAKS
implementation
A lot has been made of the Twin Peaks regulatory reform process that is set to change the regulatory
framework of our financial sector in South Africa. Like any other piece of legislation, there are those
that advocate for its implementation and those that are sceptical, writes Dumile Sibindana.
T
he 2015 Banking Summit, hosted discuss the Twin Peaks model of regulation. country as a whole. The fi nancial sector is
by The Banking Association The importance of the fi nancial involved, at some level, in all movements
South Africa, provided the sector in South Africa cannot be over- of capital, transaction payments and
perfect platform to bring in all emphasised, as it delivers a range of investments, to name a few. The gathering
key industry stakeholders – including fi nancial services that facilitate economic of these various stakeholders presented an
member banks and their representatives, growth, job creation, construction of opportunity to have critical conversations
government, the media, labour and other vital infrastructure within the context around the proposed Twin Peaks
professional bodies to name a few – to of sustainable development for our regulation and its implementation. ›
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BankerSA16_TwinPeaks.indd 17 2015/12/18 11:30 AMSouth Africa's financial operations, invest in capital goods or pay
sector: background their staff and other running costs.
The banking sector in South Africa is The inception of the Twin Peaks
arguably one of the best managed and system of regulating our financial sector
progressive sectors in our economy today, emanated from a policy document that
contributing a sizeable portion to our was published by government, titled:
GDP and tax revenue. More importantly, “A safer financial sector to serve South
the sector provides banking solutions Africa better”. The paper looked into the
to millions of bankable individuals and effects of the 2008 financial crisis and the
different scales of businesses. This is European crisis that followed, assessing
affirmed by the 2015/2016 World Economic the structure and characteristics of South
Forum Global Competitiveness Survey Africa’s financial sector. This process set in
that ranks South Africa eighth in Financial motion proposals to reform the regulatory
Sector Development out of 140 countries framework of our financial sector, and
– an achievement that should not be taken thus one of the outcomes of the paper
lightly considering that we are ahead of proposed the establishment of a system for
a number of ‘developed’ economies in improving the regulatory environment of
this category. The argument could be the South African financial sector – hence
made that if the other sectors within our Twin Peaks was born.
economy were remotely as competitive
as the banking sector, South Africa’s The issues Twin Peaks
economy would be on a drastically different seeks to address
trajectory. Regardless, the banking sector in In order to attain the goals of the Twin Greater emphasis has been placed on
South Africa should be commended for its Peaks system, the South African Reserve strengthening regulators, hence a Council
global competitiveness and progressiveness Bank (SARB) will be granted lead of Regulators will be established to
over the years. responsibility for prudential regulation enhance co-ordination.
and the Financial Services Board (FSB) The Twin Peaks regulatory regime
for market conduct regulation. “A safer consolidates the position of the SA financial
`In order to attain the goals financial sector to serve South Africa sector as being one of the most stable and
of the Twin Peaks system, better” addresses a range of issues. One of resilient sectors globally, and keeps us at the
the South African Reserve the prime responsibilities of our central cutting edge of global best practice.
Bank will be granted lead bank is to ensure stability within our
responsibility for prudential financial sector. The SARB mandate will be The two primary
regulation and the Financial underpinned by a new Financial Stability regulators (peaks)
Oversight Committee (FSOC), co-chaired The proposed regulatory framework
Services Board for market by the SARB governor and the finance includes two financial regulators (peaks).
conduct regulation' minister. Consumer protection has been a The Financial Sector Regulation (FSR)
concern and the government is planning to Bill lays the legislative basis for the
Having said that, we should acknowledge step up the protection of individuals from implementation of Twin Peaks. At its core,
the fact that our banking sector isn’t unsavoury micro-lenders and unregulated Twin Peaks was established to create a
perfect. There are various challenges that financial products. Therefore the structure safer financial sector, and better consumer
the banking sector has to address, such of the FSB will be extended to include a protection by ensuring that consumers
as: the lag in transformation in senior and banking-services market-conduct regulator. are treated fairly by financial institutions
executive positions within banks and the Furthermore, there are plans to broaden
fact that bank fees remain relatively high access to financial services by reviewing the `The global financial crisis
when contrasted with those in ‘developed’ Financial Sector Code and undertaking the is a lesson for the South
economies. The biggest criticism, however, necessary reforms to encourage ‘micro-
stems from the fact that innumerable insurance’. One of the integral pillars that
African economy to
entrepreneurs find it incredibly hard will be the focus of the Twin Peaks system avoid unnecessarily higher
to access capital from our financial is its stance on co-ordination of the various risk activity within our
institutions, whether it be to expand their regulatory bodies. financial sector'
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and are protected against the risk of these of regulated financial institutions. As the make use of various financial products in
institutions failing. The global financial central bank of South Africa, the SARB will addition to promoting confidence in the
crisis is a lesson for the South African be responsible for the prudential aspect of South African financial system.
economy to avoid unnecessarily higher Twin Peaks. Therefore, this responsibility
risk activity within our financial sector would include both micro and macro `In the first phase of
that can lead to systemic failures of our prudential aspects. Other responsibilities
financial institutions. The use of taxpayer will include maintaining overall financial
implementation, the
funds to address financial market failures stability of our financial sector with the
Financial Sector Conduct
in the United States should serve as an assistance of the market-conduct regulator. Authority (FSCA) and the
example of the possible calamity financial Additionally, the SARB is well placed Prudential Authority (PA)
risk might bring. to provide oversight on potential systemic will be created'
Secondly, the Twin Peaks system risks that may arise in the financial market
represents a shift away from the former – they are able to provide emergency The prudential and market-conduct
fragmented regulatory approach liquidity to banks and have the ability to regulators will base their regulatory
in order to address the issue of use various tools in order to respond to frameworks on eight shared overarching
regulatory arbitrage, which continues changing macroeconomic conditions. principles, although the significance each
to allow fi rms to circumvent intended regulator will have on certain principles
regulation. It focuses on instituting a The market-conduct will differ. However, for this approach to
more streamlined system of licensing, regulator: FSB be successful, co-ordination, collaboration
regulatory supervision and enforcement, This responsibility will be carried out and sharing of information between the
addressing customer complaints through by the FSB, which will be transformed regulatory authorities will be crucial.
ombudsmen, tribunal escalations, as to meet its revised mandate pertaining
well as providing consumer advice and to market-conduct regulation. It will Phases of implementing
education across the fi nancial sector. include industries such as banks, Twin Peaks
insurers, financial advisers, financial In the first phase of implementation, the
The prudential intermediaries, investment institutions Financial Sector Conduct Authority (FSCA)
regulator: SARB and the broader financial markets. Part and the Prudential Authority (PA) will be
The SARB has a key mandate to fulfil in the of this objective involves the protection created. The FSCA will be a stand-alone
enhancement of the safety and soundness of consumers when they purchase and market-conduct authority, while the PA ›
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will be an authority established within does not do so autonomously. SA banks however, cautioned against regulation
the SARB. The FSB will be incorporated have worked closely with SARB to adopt stifling investment institutions’ ability to
into the FSCA and, together with the and implement BASEL III within agreed create viable business opportunities for
Bank Supervision department in SARB, timeframes. BASEL III is a response to themselves, which would in turn have
will cease to exist. In the second phase of the 2008 financial crisis, and Twin Peaks a negative effect on the longevity of the
implementation, the reform processes will must be seen within this context, including industry at large.
pose a greater challenge; legal frameworks enabling a regulatory environment that
for prudential and market-conduct ensures stability of the financial sector, `The Twin Peaks regulatory
regulation will be developed, harmonised including effective consumer protection.
and strengthened. In some instances, this Jonathan Dixon, Deputy Executive
regime is the most
may require repealing industry-specific Officer of the FSB, affirmed the need for significant legislative
legislation and replacing it with new a Twin Peak regulatory structure of our development in the SA
legislation. Licensing procedures may also financial sector. He stated that Twin Peaks financial sector since 1994'
need to be amended where necessary to give addresses the inconsistencies within our
effect to new legislation. This won’t be easy current regulatory environment, pointing He further alluded to the greatest
and will require the active participation of to the fact that it aims to “incorporate challenge that Twin Peaks will face
all the stakeholders throughout the process. lessons that were learnt from the 2008 – which rests on its implementation.
financial crisis” and by so doing ensure Dempsey noted that South Africa doesn’t
Banking Summit 2015 market conduct within the financial sector have much success in collaboration
Panellists is effectively regulated. between different regulators. The other
Deputy Governor of the SARB Kuben The question was posed why market challenge linked to the first is the fact
Naidoo made some interesting points. He conduct forms one of the pillars of Twin that collaboration between the entire
suggested that with the implementation Peaks? Dixon responded by asserting that financial sector (market participants) and
of Twin Peaks, there would be a need “market conduct requires a specific focus”, the regulators will be tested. In addition,
to scrutinise financial conglomerates, not only in South Africa, but throughout Twin Peaks poses a skills recruitment
particularly looking at the relationships the world. He added that the proposed and retention challenge for regulatory
between subsidiaries and their parent implementation of Twin Peaks signals authorities. There may be increased
companies. The primary reason for this is a “fundamental paradigm shift” of our competition for highly skilled regulators
to ensure financial conglomerates operate regulatory environment, and places a among the different regulatory bodies,
within risk-management restrictions and greater emphasis on collaboration between as is the case in United States’ regulatory
imposed regulations. different regulatory bodies in order to environment, added Dempsey. If this
harmonise procedural standards within happens it poses a challenge to our
`The proposed the financial sector. Again, the question regulatory authorities and the approach
was posed whether the proposed Twin they will employ to retain these scarce
implementation of skills in South Africa.
Peaks regulatory reform can be achieved
Twin Peaks signals a in light of its complicated structure.
“fundamental paradigm Dixon explained that the practicalities Conclusion
shift” of our regulatory of implementing Twin Peaks would be The Twin Peaks regulatory regime is the
environment' an obvious challenge, but in saying that, most significant legislative development
the need for a Twin Peaks approach to in the SA financial sector since 1994. The
Further, the SARB acknowledged regulation can’t be questioned and is input and debate at this year’s Banking
that they do not know enough about the essential for financial stability. Peter Summit clarified numerous matters related
insurance industry and that they would Dempsey, Deputy CEO of the Association to the legislation and confirmed that the
have to consult in order to learn more, for Savings and Investment South industry, legislators and regulators are on
which will enable them to implement the Africa, reaffirmed the need for consumer the same page about Twin Peaks being the
apt regulatory measures for this industry. protection. The investment industry is appropriate regulatory regime to ensure
Naidoo also alluded to the collaborative huge, with an estimated R6/7-trillion a stable and growing industry. There was
IMAGES: SUPPLIED
relationship that the SARB and the Finance invested by South Africans in the local also agreement that implementation will be
Ministry have; among others, the fact that investment market and it is critical complex, but the industry and government
the SARB manages monetary policy in for investment institutions to manage will cooperate to ensure effective and
consultation with the Finance Ministry and consumer funds with care. Dempsey, appropriate implementation.
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BANKING INDUSTRY
IS MAKING STRIDES
ON CARD FRAUD
At the end of the third quarter of 2015, the banking industry
reported an overall decrease in card fraud of 13.8%.
W hen the banking industry released
their annual card statistics, the
South African Banking Risk Information
and more effective crime risk mitigation.
SABRIC CEO Kalyani Pillay says: “SABRIC
provides the banks with an industry view
Centre (SABRIC), on behalf of the industry, of crime trends, and facilitates a collective
published that credit-card fraud had and effective approach to the combating of
decreased by 28.6% from R353.3-million bank-related crime.”
in 2014 to R252.2-million in 2015, but that On the other hand, the industry saw
debit-card fraud had increased by 8.3% in an increase of 8.3% in debit-card fraud
the same period, from R237.4-million to for the same period last year, a significant
R257.1-million. portion of which can be attributed to
This significant decrease is attributed to either lost or stolen cards. Investigations
various mitigation measures implemented and reports indicated that, in many
by the industry in the fight against the instances, people accepted assistance from
scourge of card fraud. The effectiveness criminals at the ATM, which enabled the
of these measures must be seen through criminal to get unlawful access to card
the decrease in some of the modus CEO Kalyani Pillay information and the PIN.
operandi utilised, the arrests made by SABRIC’s analysis revealed that more
law-enforcement agencies in conjunction with the banking of the fraudulent credit-card spend was outside the country,
industry, and that bank clients are beginning to heed the while it was the other way around when it came to debit
awareness messages. The industry’s continuous improvement cards. “Some of the countries on the continent where we see
of internal systems and processes, as well as the roll out of chip greater fraudulent usage of South African issued cards are
and PIN technology, have also played significant roles. The latter Zambia, Zimbabwe, Namibia, Botswana, Mozambique and
certainly contributed to counterfeit-card fraud decreasing by Kenya,” explains Pillay. “Overseas, we are seeing a prevalence
38%, when compared to 2014. of our cards used fraudulently in countries like the US, UK,
Another contributing factor is the unique SABRIC operating Brazil, India and China.”
model that encourages greater information sharing and SABRIC encourages all bank customers to keep abreast of
collaboration among its members. Consequently, this enables a banking-related crime, and empower themselves with useful tips
more in-depth understanding of the organised crime landscape on security (which can be obtained from the platforms below).
For more information, please visit
www.sabric.co.za
www.facebook.com/sabric
www.twitter.com/sabric
Sabric_fcp.indd 3 2015/12/09 4:22 PMSPECIAL REPORT B
Keeping safe in
cyberspace Collaboration is key to stamping out
cybercrime, writes Lisa Witepski.
O
ur phones and laptops have Criminals seek opportunities and means South Africa,” Von Solmes says. That said,
become our lifelines. If a message to steal money, intellectual property and international statistics paint a bleak picture:
isn’t communicated via email or electronic identities, and continuously according to the 2013 Norton Report, South
even WhatsApp, there’s a good exploit weaknesses in users’ actions or Africa has the third highest number of
chance it won’t be received, and the things vulnerable areas in systems to achieve their cybercrime victims worldwide.
we can achieve online increasingly resemble ends. Typically, cybercriminals target the This disturbing data is borne out by a
scenarios from a sci-fi movie. While this end user, because they represent the easiest presentation made at the 2015 Security
technological ubiquity introduces greater point at which to hack into a company’s Summit, held in Johannesburg in May 2015,
variety and convenience into our lives, systems. “Cybercrime is an international where it was revealed that, during a six-week
it also opens more and more avenues for problem, rated by the World Economic period leading up to the Summit, South
people to be targeted by cybercriminals. Forum’s 2015 Global Risk Report as the Africa suffered more cybercrime attacks
According to Professor Sebastiaan von fi ft h highest risk on a likelihood/impact than any other country in Africa. What’s
Solmes, Director of the Centre for Cyber scale,” Von Solmes informs. more, according to an article by Chad
Security at the University of Johannesburg, So how does South Africa compare Fichardt, titled ‘Just How Big a Threat is
no one is immune from cybercrime. “Every to the rest of the world when it comes to Cybercrime to SA’ and published on BDLive
individual and every company is a potential cybercrime statistics? “It’s difficult to say, as in June, “South Africa is starting to feel the
victim,” he says. it is not compulsory to report cybercrime in heat from attackers across the globe.” ›
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The consequences of these attacks are legislation that addresses cybercrime, experiences and defence strategies will
far-reaching and significant. According whether to describe what constitutes a make everyone more robust.”
to the article, a report by the South cybercrime, to stipulate how to enforce the This is all the more important, given
African Banking Risk Information Centre law governing cybercrime or to determine that the sheer volume of transactions
(SABRIC) showed that “South Africans lose appropriate correctional sentencing for processed in the electronic environment
in excess of R2.2-billion to internet fraud those convicted of offences,” Tshongweni makes prevention impossible. The best
and phishing attacks annually.” Equally observes. The Bill addresses this by individuals and organisations can
concerning is the fact that Antonio Forzieri, creating a number of structures to deal hope for, according to Steenkamp and
Cyber Security Practise Lead: EMEA at with threats. These bodies will fall under Connock, is an effective response to
Symantic, is quoted in the article as saying the auspices of the departments of finance, incidents to minimise loss. Again, they
that “one in 214 emails sent in South Africa telecommunications and defence, state emphasise that this will be best achieved
during 2014 was a spear-fishing attack.” security, and defence. Also included in through a joint approach. “We believe
the Bill are definitions of offences and that it is imperative that we all make it as
`We believe that it is details of the penalties to be imposed on difficult as possible for criminal elements
imperative that we all cybercriminals. (regardless of their motive) to gain access
to any part of our environment, and to
make it as difficult as Taking action achieve this collaboration is imperative.
possible for criminal While it’s heartening that cybercrime is Skills shortages and naivety on the part of
elements (regardless on government’s agenda, individuals and the general workforce (those not directly
of their motive) to gain organisations also need to take steps to involved in cyber security) leaves us all
access to any part of protect themselves. exposed to easy access.”
our environment' Von Solmes, Steenkamp and They point to phishing as an example of
Connock agree that the key word here how being ignorant of cyber threats can
Worryingly, cybercrime fighter Jason is collaboration. “Effective protection have a massive impact on an organisation.
Louw noted in the article that “there have against cybercrime can only be achieved “The onus rests on those who have
been very few cybercrime prosecutions in through co-operation and education,” say technological knowledge to educate those
South Africa.” the Strate team. And Von Solmes concurs: who don’t.”
But Rudi Steenkamp, Head of IT “The latest approach to cybercrime sees
at Strate, and Dale Connock, the everyone in a company, from the board of Practical steps
organisation’s Head of Risk, point out directors to secretaries and cleaners, getting Obviously it will take time for industries
that South Africa is not alone in facing involved,” he says. “Cyber protection is to mobilise and present a unified front
the threat of cybercriminals. Moreover, no longer seen as the sole responsibility against cybercriminals; until then, there
they insist the country is not targeted of the IT department, but as a holistic are several practical steps organisations and
as frequently or aggressively as other strategic business risk that should be individuals can take to protect themselves.
nations. “Of course, that’s not to say that managed as part of corporate governance. It’s worthwhile remembering that
we are not at risk,” they acknowledge. Accountability rests with the board and criminals will almost always look for the
“We all need to be prepared to face this executive management, but the reality is easiest way in. “After a quick initial scan
ever-present threat.” that the best way to prevent and stall cyber of boundary defences to determine their
attacks is by promoting awareness amongst strength, criminals are more likely to
What's being done? all users.” attack the human element. This gives them
The good news is that government has Steenkamp and Connock believe that authenticated and undetected access to
taken heed, and has responded by mooting collaboration shouldn’t be restricted systems,” Steenkamp and Connock warn.
the Cybercrimes and Cyber Security Bill, to organisations; they would like to see These attacks become more sophisticated
currently awaiting approval. more co-operation between industries. all the time.
The advantage of the Bill, writes Mongezi “The time is right for all role players (like The solution? Go back to basics, Von
Tshongweni, an Executive for Legal and the financial-services industry) to begin Solmes advises. “Simply by making
Regulatory Affairs at Internet Solutions sharing experiences. Ideally, we should aim end users aware of the risks inherent
on BDLive.com, is that it will “bring South for the establishment of computer security in cyberspace, and teaching them the
IMAGE: ISTOCK
Africa in line with international laws incident response teams to watch and fundamental rules that make financial and
dealing with cybercrime”. warn one another of threats and activities. social media transactions safer, cybercrime
“At present, South Africa has no This should become a priority. Sharing can be reduced,” he concludes.
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2:24BANKER_ad_placing.indd 3 2015/12/02 2:20 PM
SPECIAL REPORT B
Why cash needs to be
protected Despite vast technological advances, cash is still king,
and its use should be guarded, writes Wendy Hardy.
A
s far back as 1950, when credit a survey showed that “cash use continues commodity highly sought after and the
cards first came onto the scene, to be prevalent among people from all age target of criminals. But, to be so naive as
people have predicted the groups and educational backgrounds, and to believe that a cashless society would
demise of cash. Granted, the that cash is the preferred first or second eliminate this threat is just that, naive.
opinion as to whether cash is here to stay choice as a payment instrument among all Criminals have never relied on targeting
or on its way out is largely influenced by ages and socioeconomic classes”. In South only one form of payment and the increase
the source of that opinion and, in some Africa alone, according to the South African in cybercrime is a clear indication that they
instances, concentrated efforts are at play to Reserve Bank, cash in circulation has passed will take from where they can.
disseminate misinformation in this regard. the R119-billion mark. Over the past 10 years, South Africa
However, the fact that there are more has experienced a shocking 337% increase
notes in circulation now than ever before, in armed robberies against businesses.
`Over the past 10 years,
and that 84% of transactions around the This equates to 51 attacks a day, and last
world are still made using cash sends a
SA has experienced a year alone South African businesses were
strong message in itself. Statistically, the shocking 337% increase in attacked 18 615 times. But, we are a resilient
number of cash transactions may have armed robberies against country and have been at the forefront
declined as a percentage of total transactions, businesses' of developing technology to combat such
but as a result of the growth in the number attacks and to remove the incentive to steal.
of payments, cash continues to grow and Anonymity, integrity and ease of use By ensuring that every element of the cash-
remains the preferred method of payment. In are sighted as the main reasons why cash management cycle is protected, criminals
the 2012 US Federal Reserve System’s Diary remains the preferred method of payment, are forced to seek other ways in which to
of Consumer Payment Choice (DCPC), but these same attributes also make this enrich themselves. ›
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A broad range of technology used to implementation of technology by cash- that their cash-management solutions are
deter criminals and protect cash is available in-transit companies in their operation is working for them. Increasingly, operators
throughout the country. And, as a result clearly evident by the 18% decrease in cash- are developing systems that add value.
of the high levels of crime experienced by in-transit heists for the year. Businesses should not look to cash-
local businesses, South African companies It is also imperative that throughout management specialists for protection only,
specialising in the safekeeping and the cash cycle, the client and various but should investigate solutions that can
transport of cash have invested millions service providers are able to pinpoint be integrated into their existing systems.
in research and development. Although exactly where the cash is. This is facilitated Imagine, for example, secure point-of-sales
much of the technology has been around through a number of highly sophisticated systems that tie into procurement systems
for a number of years, the continual soft ware programmes. These programmes and are able to produce management
upgrading and development of systems can also be used by the client for reports that result in accurate purchasing
has earned South Africa the reputation as management reporting and the tracking power. The possibilities are endless and the
a leader in the field of cash management in of business trends, resulting in the ability market needs to meet this challenge.
volatile environments. to implement business efficiencies. So
One of the most effective ways in businesses need not suffer as a result of
which businesses are able to secure cash crime and the technology exists to protect
`For the foreseeable
on their premises is by securing it in an cash, but at what cost? future, cash is here to
automated-banking device – the equivalent Many cash-management operators stay and we, as a society,
of an intelligent safe. The range of devices have conducted research into the cost owe it to ourselves to
available is broad, and depends on the of a business managing its own cash protect, stimulate and
functionality required, and the level of versus partnering with cash-management grow our economy. We
security and protection needed on site. specialists. Every business is different and
Having secured cash on the client’s their requirements are client specific, but if
owe it to this age-old
premises, security during the remaining one compares the direct costs of traditional commodity to treasure
stages of the cash cycle needs to be cash control versus a conversion to, for and protect it'
considered. Unless the cash on the premises example, an automated cash-management
will be recycled, it needs to be moved from service, the results are surprising. In conclusion, other payment methods
the client’s premises to either a bank or Businesses need to take into account have their place. But when one considers
a cash-processing facility. This transfer the costs of insurance, shrinkage, staff reports by the US Federal Reserve that
of cash should be arranged through a employed to manage the back office, the predict an average growth in cash of
reputable cash-in-transit company. It is no cost of funds held on site and deposit fees, 1.7% per year from now until 2022, as
longer safe for businesses to “walk” their to name a few factors. These costs, coupled well as the general consensus by 79% of
money to the bank. Ensure that your cash- with the risk of doing business in our central bankers, commercial banks, and
in-transit supplier employs registered and current environment and the potential for cash-management companies surveyed
trained security officers who are issued with cash loss or worse still, loss of life, add up to by Currency Research in 2012, cash will
body armour and firearms for personal a heft y sum. Can your business afford the increase for a decade from that date.
protection. Cash should be moved from a reputational risk and subsequent trauma For the foreseeable future, cash is here
client’s premises to a fully armoured vehicle experienced by staff and patrons? to stay and we, as a society, owe it to
in tamper-evident bags, which should in ourselves to protect, stimulate and grow
turn be secured in a cross-pavement-carrier our economy. We owe it to this age-old
design to render notes unusable if illegally
`No one will deny that commodity to treasure and protect it.
taken from the security officer.
the cost of protecting Why force such a valuable commodity
The armoured vehicles deployed by your assets, staff toward extinction when a cashless society
cash-in-transit companies are a far cry and patrons comes is clearly not the preference of the majority
from the soft-skin vehicles used many at a price' of people? For years people have fought for
years ago. Today, these vehicles are fully the right to choose – allow them to, and
IMAGES: ISTOCK, AFRIPICS
armoured and fitted with the latest tracking No one will deny that the cost of allow them to do so safely.
technology and protection, to ensure the protecting your assets, staff and patrons The writer wishes to acknowledge the
safety of both your assets and the staff comes at a price, but instead of viewing following people/companies for their
performing these services. The investment this as a grudge purchase, businesses need input: Richard Phillips of Cash Connect;
in research and development and the to see this as an investment and ensure Hannes Venter of Gunnebo; and G4S.
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SPECIAL REPORT B
The digital native:
Generation M
Are banks geared to meet the emerging generation's banking preferences? By Solly Moeng.
I
n a ground-breaking survey carried out have grown up with digital services – and (21.7%) and Singapore (15.1%). The sample
in the USA, the UK, Mexico, Brazil and their views on mobile banking. Not only was 58% female, 42% male.
Singapore, Gemalto interviewed close would this shine a light on an unchartered According to the survey, there has been
to 1 200 young people, aged between 16 segment, but it would also give an idea a major shift – driven essentially by the
and 24, with a view to understand their of the next generation of services that soaring use of smartphones and tablets – in
online banking habits and preferences. financial institutions would need to deliver young people’s use of banking services.
Also called millennials or Generation M, to customers whose phones have never been
these young people were born into a world anything other than smart. “We therefore `Over a quarter of those
of smartphones. Unlike generations before undertook this online study to get an
them, they cannot imagine a world without understanding of exactly how rapidly – and
we surveyed (27%) say
smart devices. how passionately – young people today they would rather go
To put this study into perspective, have come to regard the importance and without a bank account
Banker SA invited Paul Opie, Gemalto’s security of their bank’s mobile offering and than without their phone'
Field Marketing Manager for Banking services,” Opie explains.
Solutions, for a deep dive into its findings The survey was done online, a preferred Nearly four in five (77%) of millennials use
and implications. We also invited views from channel for millennials. A total of 1 184 online banking services; 42% use them five
the main South African banks, specifically people aged 16-24 were polled through times a month or more. Furthermore, more
asking them to tell us how ready they are to SurveyMonkey, with a consumer database than three in five (62%) use mobile-banking
increase their reach into and retention of this provided by SmartSurveys in the USA applications and almost half (47.6%) bank by
new generation of customers. We especially (21.7%), UK (21.1%), Mexico (20.3%), Brazil phone. Clearly, the decades-old tradition ›
wanted to understand how banks can use
mobile devices to attract millennials, while
keeping customer data safe and encouraging
safe consumer mobile behaviour.
Commenting on the methodology used
by Gemalto in conducting the survey
and its choice of subjects, Paul Opie
says: “Existing studies covering a mix of
demographics have shown a universal rise
in the use of mobile devices for banking.
However, those studies only analyse the
usage trends of people over the age of 18,
with no specific insights into the behaviour
of teenagers or young adults. We felt that
millennials constitute a consumer base that
needs some specific focus, and we were very
clear about who we wanted to engage.”
The survey sought to assess the mobile
habits of these digital natives – people who
Edition 16 | BANKERSA 31
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