An edge SA Fintech developers need, the finger on the pulse

The financial sector is rapidly growing and when you couple that with the growing local and global regulatory changes, you see a need for some edge for developers.

As digital transformation impacts consumers, this rapid innovation for advancement could be part reason consumers are exposed to new forms of risk.

As the South African fintech landscape blossoms, developers need specific skills and approaches to gain an edge in order to make meaningful contributions to an otherwise dynamic ecosystem.

An uptake of third-party software solutions seems plausible in order to enable financial services and insurance companies to meet the demands of their daily business operations.

But what happens if the third-party software vendor goes out of business or is unable to maintain services?

We take a look at Escrowsure, an international software firm that manages the risks associated with exposure from third-party software providers.

Think of a customized agreement between the software developer, the user, and the software escrow agent. This according to them, safeguards the software source code and makes it available to the user in the case of trigger events that threaten business continuity.

Guy Krige, executive Risk Consultant at Escrowsure maintains that software developers and start-ups also have a critical role to play.

He says fintech start-ups that include software escrow in their go-to-market strategies show their commitment to safeguarding their clients’ digital futures and gain the upper hand over competitors.

“Software developers entering into software escrow agreements offer a proactive solution to the risks associated with service disruptions. These agreements act as a safeguard against unforeseen circumstances such as vendor insolvency, acquisition, or the inability to maintain services. For start-ups competing for sales ascendency and funding, building resilience into software solutions becomes a key differentiator. By proactively embracing escrow agreements and ensuring compliance with evolving regulations, these software vendors not only enhance their value proposition but also gain a competitive edge when vying for new clients.”

The point is simple, South African software developers and start-ups planning to gain local and global clients must be able to navigate and comply with regulations such as:

• The South African Financial Sector Conduct Authority & Prudential Authority which includes the Joint Standard.
• The European Union’s Digital Operational Resilience Act (DORA) which imposes updated cyber security and resilience requirements on European financial institutions and their critical suppliers.
• The UK’s Prudential Regulation Authority (PRA) SS2/21 which urges UK institutions to review third-party arrangements and evaluate the need for software escrow.
• The Reserve Bank of India’s (RBI) draft Master Direction which includes controls that must be deployed and complied with by April 2024.
• The USA’s Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC) and Federal Reserve Board’s (FED) joint statement on outsourcing and third-party risk management for banking institutions.

Krige says, “It is clear which way the wind is blowing, and in 2024 and beyond, we anticipate the ongoing introduction of additional regulations aiming to ensure businesses and consumers are protected from unexpected disruptions. It’s surely time for software developers and FinTech start-ups to have their finger on the pulse and to integrate software escrow into their business models.”

There needs to be an overall understanding of the local market, as South Africa’s financial system and technological infrastructure has unique characteristics different from global giants.

When we understand these regulatory frameworks and consumer preferences we then can develop relevant and impactful solutions.

An example would be a developer designing a mobile payment app. They must factor in the country’s high unbanked population and limited internet access.

Another edge to factor would be security and data privacy as financial data handling demands a highly robust security measure, alongside strict data privacy regulations such as POPIA.

There needs to be an overall awareness and mindset shift, to understand the local context while also embracing collaboration. With this in line, fintech developers will be able to create solutions that address realistic needs.

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