The clock is ticking for stakeholders to provide their input on the FSCA’s draft Financial Education Commitment Charter. Although the official deadline falls on Sunday, 19 January, the Authority has confirmed that submissions will be accepted until 20 January – offering a final opportunity to shape the future of financial literacy in South Africa.
Launched at the inaugural FSCA Financial Education Summit on 28 August last year, the draft charter is intended to serve as a guiding framework to ensure that consumer education efforts are sustained, co-ordinated, and effective. It also seeks to align the financial sector with national goals for improving financial literacy, capability, and the overall well-being of financial customers.
In his keynote address at the summit, Unathi Kamlana, the Commissioner of the FSCA, said a unified and collaborative approach is essential to ensure that financial education reaches every South African in a meaningful way. He noted that although National Treasury’s policy document underscores this need for collaboration, the rapidly evolving financial sector landscape demands that the industry goes beyond working together.
“We must commit to having clear and measurable targets if we want our efforts to have a lasting and meaningful impact,” Kamlana said.
Read: FSCA and National Treasury urge financial sector to unite on financial education charter
As it stands, the draft Financial Education Commitment Charter outlines five key commitments for financial institutions, emphasising the need for collaboration and shared accountability:
- Adopt a board-approved and published financial education plan. Leadership involvement is crucial to driving these initiatives, ensuring institutions remain accountable and transparent in their goals and actions.
- Deliver targeted financial awareness and education programmes. This commitment focuses on addressing financial literacy gaps through multi-faceted approaches, such as workshops, webinars, and community outreach. Institutions are encouraged to invest resources to reach diverse audiences effectively.
- Ensure financial education follows best practice norms and standards. Financial education plans must adhere to established standards, ensuring their content and delivery are effective and credible. A commitment to quality underpins the entire initiative.
- Enhance programme impact through resources, partnerships, and digitisation. Institutions are urged to explore innovative ways to expand the reach of their programmes, making them more accessible and impactful. Whether through partnerships or digital tools, scalability is key to success.
- Prioritise customer financial wellness in a demonstrable way. Beyond regulatory compliance, financial institutions are expected to align their practices with principles of fairness and customer-centricity, fostering a holistic approach to financial well-being that goes beyond profit motives.
This week, the FSCA announced that submissions have been received from Absa, the Association for Savings and Investment South Africa, Discovery, the FAIS Ombud, First Rand, Insurance Institute of South Africa, Nedbank, Ninety One, Old Mutual, the Ombud Council, and Standard Bank.
How financial institutions could be affected
Financial institutions, often on the front lines of consumer interaction and financial decision-making, play a crucial role in shaping financial behaviours. During his address, Kamlana emphasised the importance of their involvement, stating that “the role of financial institutions is crucial”.
He also noted that the commitment to financial education should not be reduced to ticking a box for compliance with the Financial Sector Code, which mandates 0.4% of annual net profit after tax be spent on consumer education.
“Nor should it be seen solely as a matter of corporate social responsibility or a way of creating awareness of specific products and services,” he added.
This raises the question: what should it be, and how could it impact the daily operations of financial institutions?
Although the exact impact of the Financial Education Commitment Charter, once approved, remains uncertain, some projections can be made based on the commitments outlined in the draft.
The first commitment, the adoption of a financial education plan, requires institutions to implement a board-approved financial education plan. This plan must clearly demonstrate their dedication to improving financial literacy and align with national goals and strategies. It aims to enhance financial decision-making for individuals and communities.
From a cost perspective, introducing such plans may require significant resource allocation for needs assessments, programme development, and setting clear objectives. Compliance will necessitate robust monitoring and evaluation processes to assess the effectiveness of these initiatives. Additionally, institutions may incur ongoing costs from collaborating with financial education experts to ensure their programmes remain relevant, impactful, and in line with national objectives.
The second commitment focuses on the delivery of targeted financial education programmes designed to improve financial literacy across individuals, households, and communities. These programmes aim to raise awareness of financial risks and opportunities, foster informed decision-making, and support overall financial well-being.
Financial institutions may need to establish systems for delivering these programmes, which could range from workshops to digital platforms. This would require investment in both technology and human resources to scale the initiatives effectively. Institutions will also need to draw a clear line between education and marketing to preserve consumer trust.
On the compliance front, institutions can expect increased scrutiny to ensure that any consumer data gathered during these programmes is not misused for marketing purposes.
The third commitment mandates that all financial education initiatives adhere to best practices and international standards. The FSCA advocates for a consumer-centric approach, particularly targeting vulnerable groups, while encouraging the use of technology to bolster financial understanding.
For financial institutions, this could mean revising existing education materials to meet international benchmarks, such as the Organization for Economic Co-operation and Development’s principles of good practice. Complying with these standards may increase compliance costs due to expert consultations, audits, and reporting requirements.
The fourth commitment focuses on increasing the impact of financial education programmes, aiming to expand access to educational resources that lead to positive behavioural changes in more communities.
Financial institutions will likely need to assess target audiences, design evidence-based programmes, and scale their outreach efforts. This could involve a mix of digital tools, partnerships, and traditional media. They will also face the challenge of having to ensure that these initiatives reach those with limited access to digital resources and tracking measurable outcomes consistently.
The final commitment calls for prioritising financial wellness, aligning with Treating Customers Fairly principles. Financial institutions will need to offer personalised education, tools, and resources to promote financial well-being.
This commitment may require institutions to integrate financial wellness assessments into their customer interactions, investing in more tailored education offerings based on individual financial health.
So again, increased operational costs are expected.
It should be noted, however, that although these digital tools and focus on personalised advice may incur additional costs, the potential benefits might be significant: improved customer satisfaction, loyalty, and long-term financial resilience, along with empowering more individuals to make informed financial decisions.
Although much of this remains speculative, one thing is clear: financial institutions will undoubtedly be impacted by this charter. Stakeholders who haven’t yet done so, should seize the opportunity to contribute their perspectives before it is finalised.
The FSCA states that recommendations and comments are welcome from the financial services industry, regulators, ombudsman, associations and financial education practitioners.
Access the MS teams link for comments and recommendations here.
