Gauteng continues to be a hub for fintech innovation

Council for Scientific and Industrial Research said South Africans were allowing cyber criminals to exploit them due to social media habits. Photo: Kacper Pempel/Reuters

The Gauteng Premier, David Makhura, recently asserted that his province is Africa’s 7th largest economy, and that it was a financial hub of sub-Saharan region. The aforesaid assertion was correct. All South African banks, the big four auditing firms, and mobile network operators have their headquarters in Gauteng. PWC and Deloitte has recently spent more than R2-billion constructing their new headquarters in Gauteng. Most multinational corporate and investment banks also have their African operations based in Gauteng.  It is also in Gauteng where phenomenon of technology and finance first emerged and this led to a concept called “fintech firms”.

It was in Gauteng where for the first time wireless signals were employed to link a point-of-sale credit card reader into banking system, enabling small vendors to accept credit cards. Gauteng is also took leadership inventing mobile money in the form of the wireless application service provision.  Due to this innovation, good governance, and strong regulatory framework, the South African financial institutions protected us from the 2008 great recession – something that the Americans and Europeans could only envy. Another great phenomenon that emerged in Gauteng was the move of banks towards becoming mobile network operators, and mobile operators getting into banking – thereby enhance the “fintech” concept.

Interestingly, Gauteng leadership in banking innovation and fintech phenomenon also led to leadership in cyber-crimes. According to reports from the South African Police Services and South African Banking Risk Information Centre (SABRIC) skimming is one prominent cyber-crime in South Africa (SA). Fraudsters use skimming devices to harvest the credentials of the debit or credit card owner by copying information in the card’s magnetic strip and thereafter produce a counterfeit card.

Cyber-crimes have caused the South African banking system to become more smart and superior compared to their counterparts worldwide: the vendor machine technology that enables a customer to pay their bills at their tables without giving away their cards was initiated in SA to thwart skimming.

Another prominent cyber-crime in SA is industrial espionage or rather corporate spying. The then Director General of the National Intelligence Services, Vusi Mavimbela, once confirmed that several South African companies are victims of cyber spies who hack their information systems and sell local trade secrets and intellectual property to multinationals competitors. After noting that the government was not recruiting the cyber inspectors (police) in line with the provisions of the law – corporate SA has closed the gap by appointing its own cyber-police, and they are largely found in the banks and other corporate sectors.

South African banks have dedicated teams of information security professionals who ‘combat’ cyber-crimes.  After observing clients’ concerns regarding Internet and cell-phone banking crime, banks have responded forcefully to cyber-crime, and with superiority, in order to prevent financial losses and reputational damage.  The cyber-police in the banking industry remove phishing (deceptive) emails and spoofing (deceitful) websites whilst suspicious emails are blocked before they reach the targeted victim.  Banks have got monitoring systems, behaviour pattern analysis, and early warning systems. For example, if a spoofing site is picked up worldwide on the Internet or a phishing email goes out, they typically shut the site down within 45 minutes to two hours.  It doesn’t matter where it sits in the world, and the cyber-police who are largely based in Gauteng have worked with the Interpol and successfully got the fraudsters arrested.

Banks are also available 24 hours a day to help their customers in cases where they suspect their Internet Banking accounts are being defrauded.  Customers can phone the contact centre, and there is also a button on the Internet banking screen that customers can press to report fraud and their bank account will be immediately closed.

During the research I have conducting regarding cyber-crime – I noted that there are times when cyber-police that are based in South African banks literally prevent money from leaving the Internet bank accounts fraudulently.  They also ensure that transactions via Internet banking are undertaken in an encrypted environment.  It is not possible for criminals to intercept encrypted transactions. I also found that banks were more compliant with regard to the information security aspects of the legislation than all other industrial sectors that participated in the study I was conducting.

Companies in other industrial sectors don’t have huge volumes of transactions across the Internet like the banking sector. Consequently, they have very little interest in establishing organs like SABRIC or establishing their own sophisticated teams to fight cyber related crimes for 24 hours. If other South African provinces adopt some of Gauteng investment strategies – entrepreneurship, innovation and business growth will thrive in SA.

Rabelani Dagada is a Professor of Practice in Digital Commerce at the University of Johannesburg’s Postgraduate School of Engineering Management. He is on Twitter: @Rabelani_Dagada