University of Cape Town. Picture: SUNDAY TIMES
University of Cape Town. Picture: SUNDAY TIMES

The University of Cape Town (UCT) has become one of the first tertiary institutions in Africa to offer a degree specifically designed to equip students with the critical skills and knowledge to embrace the technological revolution in the financial services sector.

One of its key focus areas will be blockchain technology, or the distributed ledger system, that has given rise to new crypto-currencies such as bitcoin and ether.

The crypto-currency market is reportedly now worth more than $50bn and the use of virtual currencies is gaining traction in SA. A June 2017 paper by the International Monetary Fund suggested that banks should seriously consider investing in crypto-currencies as "rapid advances in digital technology are transforming the financial services landscape".

Co-Pierre Georg, a senior lecturer at UCT’s African Institute of Financial Markets and Risk Management, said SA’s financial services industry faces a significant challenge: the rise of financial technology, or fintech, combined with a lack of skilled graduates able to navigate this complex new terrain.

UCT has sought to tackle this problem by offering a new master’s degree in data science with a specialisation in financial technology, said Georg, who is also the course convener. The programme is due to commence in 2018.

"We are in constant and close contact with the financial services industry and know that it is facing a shifting demand for skills. In the past, companies were mainly looking for advanced mathematical and modelling skills," said Georg. "While these are still required, by far the largest demand now is for graduates who have a thorough understanding of finance combined with a mastery of modern data analytics and software development expertise."

He added: "Our students will be able to develop these skills in the two most exciting areas of fintech: machine learning and blockchain technologies."

Over the past few years, machine learning has given the world self-driving cars, speech recognition, and a vastly improved understanding of the human genome. In the financial services industry, machine learning is used to analyse vast data sets to, for example, identify a customer’s credit profile, recognise profitable companies, or find an optimal investment strategy, he said.

"Students taking the new UCT degree will master machine-learning methods and be able to develop their own applications using these methods."

Meanwhile, the government has said it is aware of the technological developments in virtual or crypto-currencies and has already established an inter-governmental working group that will, in co-operation with experts from the private sector, monitor developments with the view to possibly regulating the sector. Crypto-currencies remain largely unregulated in most parts of the world.

In a reply to a question in Parliament in July from the Freedom Front Plus, Finance Minister Malusi Gigaba said the position on virtual or crypto-currencies is that they are currently not regulated (that is, they operate without the authority of central banks).

"An alert to this effect was issued jointly by the National Treasury, the South African Reserve Bank, the Financial Services Board, the South African Revenue Service and the Financial Intelligence Centre in 2014, which cautioned members of the public to be aware of the risks associated with the use of virtual currencies for either transactions or investment," said Gigaba.

"As noted, the relevant authorities continue to monitor and assess the use of virtual currencies and consult with private-sector stakeholders in this regard. Further guidance or regulations may be issued, should the need arise."

Freedom Front plus finance spokesman Anton Alberts said it is important to strike a balance between innovation and the protection of consumers and investors.

He said it is still early days for the phenomenon of fintech, which will have to go through a volatile developmental phase, similar to the internet in its early stage, but which will eventually reach a stable stage where the successful virtual currencies will coexist with fiat currencies.

“The underlying blockchain technology also has a lot of potential to be used for purposes other than creating cryptocurrency. Blockchain technology is a cheap, effective and increasingly safe way to do transactions as well as to transfer money from one person or institution to another.

“The FF Plus is also aware of Orania’s initiative to convert its money to virtual currency. This project could serve as a test run for the national use of virtual currency,” said Alberts.

He added: “Virtual currency and blockchain technology have the ability to decentralise the financial sector worldwide. It can either drastically change or put an end to banks and other financial institutions as we know them. The implication for governments is even greater, because the technology enables tax payers to receive their salaries and to trade using currencies that are presently not traceable or detectable in these new virtual economic systems.”

“The implication for governments – in this case, the ANC government – is that legit new payment methods within virtual economic systems will develop very quickly and these will not be regulated by SARS. That means that most tax payers’ dream of not paying a single cent in tax to the corrupt ANC government may very well come true,” said Alberts. 

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