Question

Financial technology, also known as FinTech is an industry composed of companies that use new technology and innovation with available resources in order to compete in the marketplace of traditional financial institutions and intermediaries in the delivery of financial services.

The use of mobile apps is embedded in the average Mauritian’s everyday life while the country already provides services such digital insurance, mobile banking amongst others.

Several enterprises, particularly those aiming towards Africa, are already using Mauritius as a viable Fintech platform. The stable business climate and well-established corporate governance culture in Mauritius, favorable time zone, excellent connectivity and highly-educated labour, mitigates the high-risk profile of certain African countries.

Question :

Select a local company of your choice which provides FinTech services and Explain the services provided by the chosen company & justify why the provided services   falls under the FinTech umbrella of technologies.

(Please answer to be based on Mauritian context - 1000 words)

Answer 1

Given the speed with which the global fintech industry has grown, not to mention the fierce competition among countries to establish themselves as regional, or global bases, it is no surprise to see Mauritius has established the Mauritius Africa FinTech Hub (MAFH). Described as a “fast-growing ecosystem where entrepreneurs, corporations, governments, tech experts, investors, financial service providers, universities and research institutions can collaborate to build cutting-edge solutions for the emerging African market,” MAFH is confident about its prospects, and those of fintech. As countries race to establish themselves as global hubs for revolutionary digital hardware and software for fintech and blockchain, Mauritius is determined to ensure it develops the right regulatory framework and operating environment for such state-of-the-art technologies to not just survive, but thrive.

The precedents are certainly positive, as Samade Jhummun, CEO of Global Finance Mauritius, underlined: “Mauritius has a long history of reinvention and is recognized for its openness, ability to adapt and respond to changing times, as well as its highly educated and skilled workforce. These attributes will help us on our future path to a high-income economy which will generate jobs and growth for future generations, with the Mauritius International Financial Center (IFC) at the heart of it.” Capital Horizons is an award-winning, boutique provider of financial services offering bespoke solutions to a broad range of customers. Licensed and regulated by the Financial Services Commission (FSC) in Mauritius, the firm offers corporate and legacy management services to institutions and high net worth individuals, respectively, and stands out for its capacity to cater to the Japanese. The firm has focused on combining fiscal optimization through the creation of offshore structure while maximizing what the Mauritius jurisdiction has to offer, namely debt restructuring through the various international banks present.

This has allowed many of the company’s clients to decrease their cost of debt by utilizing interest rate swaps. Moreover, cross-border financing has allowed its clients to generate an offshore war chest, which can be used for international investments while choosing in which jurisdiction they wanted to keep their assets tied. “One of our proudest moments came this year when we were nominated by at least five international magazines, and won the corporate finance advisor of the year for Mauritius by (digital business magazine) Acquisition International,” revealed Capital Horizons CEO, Shaan Kundomal, who also sits on the board of directors of several firms, including a subsidiary of the SBM group. “Inspired by these achievements, we are constantly investing in our infrastructure through a secured cloud-based enterprise resource planning system on which our clients can monitor all their transactions, accounting, net asset values and requests”

Adherence to regulations pays dividends

Trust and good governance are at the heart of Capital Horizons’ philosophy, with CEO Shaan Kundomal highlighting the importance of such compliance given the national regulator’s eagle-eyed officials are always watching. “The FSC has a very strong surveillance enforcement division, and every year send their teams to audit all companies like ours to ensure we are doing things right and our clients are proceeding in transactions correctly,” Kundomal said. “It’s highly regulated and monitored environment, while on the other side there is ease of doing business without much bureaucracy.”

Headquartered in Ebene CyberCity, MauBank is the third-largest bank in Mauritius and offers a full range of financial services to private and corporate clients, high net worth individuals, companies, public and financial institutions. MauBank is at the forefront of the digital revolution and a major investor in new technology to enhance customers’ experience.

Innovative mobile apps win awards

“We do not have a digital transformation strategy, we have a customer experience strategy,” said Premchand Mungar, CEO of MauBank. “ This may seem like a strange statement, but one of our main objectives is to provide a class-leading customer experience and no technological tool can deliver that by itself. Digital transformation for us is not an objective, it’s a means to an end. “We are not approaching digital transformation from the perspective that we want to implement a specific technological strategy. For instance, we are not saying our strategy is to use our data to generate next-product-to-buy predictions or apply distributed ledger technology to cross-border payments. These are all tools, tools with great potential,” Mungar said

“Our strategy is not about implementing digital tools, but looking at our customer experience as a whole. We have identified three concrete goals: We want our products to be highly personalized, operationally transparent to our clients, and be efficient in delivering our products. According to a 2017 survey, nearly half of the respondent financial institutions said their latest digital investment is failing to generate returns higher than the cost of capital. One of the main reasons why any transformative strategy does not deliver is because of a failure to scale up.”

Mungar added MauBank made a clear statement of intent with its mobile banking app WithMe, designed to adapt to customers’ changing needs and ensure a seamless banking experience. “We became the first bank in the country to on-board customers through a mobile app,” he continued. “Online leasing application platform MyLease allows customers to calculate how much lease they could take and make their application easier, coupled with a 10-minute approval in principle. Both products won the Infosys Finacle Client Innovation Award 2019 in the API Innovations Category and Emerging Technology led innovations Category.”

Fintech is essentially technology that is applied to financial services, or transaction operations in businesses. Fintech has over the last few years moved from back-end data centres to embrace comprehensive transaction processing systems – often involving emerging tech such as artificial intelligence, blockchain, and robotic process automation – including services offered via the cloud.

Increasingly, regulators are under pressure to accept that the latest tech solutions across the fund industry are a reality that will impact the way that people do business, notes Graham Patrick, a senior client manager at Maitland, a financial, corporate and political communications consultancy.

"Rather than resist what many see as 'inevitable', the government of Mauritius has instead recognised that the digital revolution presents an opportunity for smaller economies like that of Mauritius to attract investors," Patrick says. He adds that innovation, in the form of artificial intelligence and fintech, including blockchain, is seen as a means to increase private investment and employment in Mauritius.

Fintech has long been touted as a way to bring credit worthiness to the under- and unbanked populations, but regulation has been an issue, which is why Mauritius' regulatory approach has promise.

As the only international financial services centre that is also a member of all the major African regional organisations, Mauritius is an important portal and source of investment for low-income countries and directs most of its outward foreign direct investment to African countries, and some Asian countries as well. "The country's heritage as a gateway into Africa positions it perfectly to facilitate and advocate a new wave of investment in the fintech space," says Maasland.

Mauritius' unique relationship with Africa – on the outskirts of the continent – positions it as a key stakeholder in the continent's fintech industry. As Maasland says, leading by example and facilitating investment across Africa, Mauritius will play a major role in how other African regions develop their fintech sectors and put them on the global map.

Example of fintech services by Maitland:

• The Custodian Services (Digital Asset) Licence; and
• The Digital Asset Marketplace Licence

These new licences, once in effect, aim to provide a regulated environment for the safe custody of digital assets by investors and further enable the exchange of digital assets.

Blockchain is essentially defined as an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. Cryptocurrencies are digital assets designed to work as a medium of exchange using strong cryptography to secure financial transactions, control the creation of additional units and verify the transfer of assets. Blockchain is the technology behind most cryptocurrencies. Digital currency exchanges, on the other hand, act as a means of facilitating the exchange of cryptocurrency for alternative cryptocurrencies, or fiat currency.

Globally, there has been a significant increase in the interest in blockchain and digital assets – notably Bitcoin and other select cryptocurrencies. Whilst there are both proponents and sceptics of cryptocurrencies, the blockchain technology itself is widely regarded as disruptive with multiple beneficial use cases. In the financial sector, where fast, reliable and accurate record keeping is required, the potential is unmistakeable. Yet, the questions around “is it a currency?” and “is the hype a speculative bubble?” have certainly restricted wider adoption. Most jurisdictions lack legal and regulatory certainty around the treatment and recognition of digital assets to mitigate these concerns.

The introduction of licences in Mauritius for digital assets custodian services and a digital asset marketplace will, no doubt, reduce the uncertainty and be beneficial for a variety of international blockchain companies looking for a robust jurisdiction from which to operate.

Whilst FinTech is gaining in momentum, there are notable risks inherent in the nature of digital assets. To address some of these challenges, particularly cyber-security and AML/Terrorist Financing issues, the Mauritius Financial Services Commission (FSC) has been tasked with ensuring applicants have appropriate cyber-security and cyber-resilience policies and capabilities in place. Furthermore, the regulatory framework against money-laundering and terrorist financing for both banking and non-banking financial services will be harmonised and updated in line with the perpetually evolving developments in FinTech.

It remains to be seen how these initiatives will translate into practical scenarios – for example, it may be challenging to open a banking account in Mauritius for businesses involved in trading in digital assets. However, with the Mauritius FSC being simultaneously tasked with putting in place guidelines for investment in cryptocurrencies, these challenges may soon be something of the past.

Mauritius, with its recognised and sophisticated financial services industry and vibrant emerging ICT sector, is increasingly well placed to take advantage of the opportunities FinTech brings for both Africa and the rest of the world. The Mauritian Government’s course of action is clearly articulated along the lines of embracing blockchain and other disruptive FinTech technologies.

SOURCE: https://www.cio.com/

https://www.japantimes.co.jp/

https://www.maitlandgroup.com/