Trading and provision of services have now been made easier as physical contact is no longer needed before commercial transactions can take place, all thanks to Financial Technology (FINTECH).
Capital market, a financial market for trading securities of companies, is not left out in the tremendous changes brought about by technology, as many online platforms are now available for buying and selling company securities quoted on the Nigerian Exchange Limited (NGX).
Fintech gives real-time market updates and recommendations. At the same time, it allows new investors to learn about strategic investments, stock market jargon, and fail-safe measures.
While facilitating informed investments, fintech ushers time-saving and cost-effective stock market participation.
Fintech as a tool
According to investopedia, Financial technology (Fintech) is used to describe new tech that seeks to improve and automate the delivery and use of financial services.
It has also been referred to as the synergy between finance and technology, which is used to enhance business operations and delivery of financial services.
Some xamples of Fintech as of now are Paystack, Paypal, Flutterwave, E-transact, Remittal, etc.
Investment and Securities Act, 2007, the chief legislation on capital market, makes no provision for definition of capital market. But it has been defined as the financial market where trading of companies’ securities takes place.
It has also been described as a financial market for long term financial assets such as government bonds, corporate bonds and equity and unlike money market, which functions to provide short term funds, rather, it is a network of financial institutions that in various ways bring together suppliers and users of capital, facilitating the issuance of secondary and long term financial instruments.
Giving the concept a try
The Securities and Exchange Commission said one of its cardinal objectives in rolling out its Regulatory Incubation Programme for Fintechs was to ensure the safety of investors and their investments in the capital market.
Director, Registration, Exchanges, Market Infrastructure and Innovation of SEC, Mr. Abdulkadir Abbas, during an interview, stated that the regulatory incubation programme was designed as an interim measure to actually facilitate genuine regulation of Fintech activities that will conform to capital market issues.
He said the idea of coming up with this programme, which is like a sandbox, is to be able to come and test innovative ideas as stated in SEC’s guidelines, adding that the incubation period would be open for one year.
According to Abbas, “it is just for testing, it will not be approved at that stage but all Fintech ideas that conform with investment activities as defined in Investment and Securities Act 2007 can be tested under that kind of programme.
“As we informed the market, there is going to be an initial assessment before it can be on-boarded into the regulatory incubation programme.”
The Director said the Commission, through the RI, was providing an avenue where fintechs can test their ideas without affecting the market integrity adding that one of the other objective was to be able to create an opportunity to solve an existing problem in the market.
Abbas stated that the take-off had been very encouraging with SEC gaining traction with market participants showing more interest and have commenced the first stage, which is the initial fintech assessment route.
He disclosed that before the take-off of the RI, SEC had been having engagement with various fintech applicants some of whom are existing capital market operators.
“Some are existing market operators; some are actually new interests into the market, so we have been having this kind of engagement. And from the time when we announced the take-off till today, what has been happening is that a lot of applicants are actually accessing what we call the initial assessment form so there is a need to enable us provide the initial information and that is the first stage of onboarding you into the RI, that is where we are now.
“And we have had couple of engagements and what interest us really is the traction of new fintech companies providing a solution to an existing problem in the market.
“But what we are trying to do now very quickly is to encourage more of this fintechs to come now that we have opened this phase.
“We believe that it will really deepen the market and it will facilitate bringing new products into the market and new ideas will come on board towards solution of existing problem in the market.
“As I said earlier, the principal plan is to actually provide an avenue of new solutions without compromising on investor protection which is our own key objective,” he said.
Speaking on the legitimacy criteria, Abbass said: “Right, there are five legitimacy criteria. First of all, you must have a kind of idea that will really bring a solution to an existing problem. That is one of the legitimacy criteria.
“Second, as a fintech company you must be able to really fill the initial assessment form and demonstrate to the commission that your idea or proposal or solution, has conformed to the investment activity that has been under the scope of the ISA which is our own purview.
“Thirdly, you must be able to be ready, to test live using a new test scope of the market with live investors or live customers as it were and then you must be able to commit that you will abide by the rules and regulations if you’re onboarding and the last issue is that you should be ready to now commit that once the rules are put in place after you come out of the regulatory incubation you must now comply with the existing rule that will come out as a result of that testing because we too we are trying to learn and by the time that we learn, we can be able to come up with a rule that would now fit that kind of activity.
“So in terms of percentages, we just started and we are already getting more applications, even this morning we received quite a number. So I can say we have quite a number of applicants that are really interested in this testing, using the regulatory incubation that SEC has come up with”.