The South African Banking Paradox: Abundance, Consolidation, and the Coming Reckoning

Banking consolidation in South Africa is accelerating as shrinking margins, near-zero fee structures, rising cybercrime costs, and fragmented customer relationships make standalone banking increasingly unviable. Challenger banks, retailer-backed lenders, and mobile-first platforms are multiplying while simultaneously eroding profitability, creating structural pressure that will likely force mergers, partnerships, or exits across the sector.

These thoughts are my own and I am often wrong, so don’t get too excited if you disagree with me.

South Africa is experiencing a banking paradox. Consumers have never had more choice, with digital challenger banks, retailer backed banks, insurer led banks, and mobile first offerings launching at a remarkable pace, while at the same time the fundamental economics of running a bank have never been more challenging. Margins are shrinking, fees are collapsing toward zero, fraud and cybercrime costs are exploding, and clients are fragmenting their financial lives across multiple institutions while committing deeply to almost none of them. This is not merely a story about digital disruption or technological transformation, but one about scale, cost gravity, fraud economics, and the consolidation that those forces make inevitable.

Some will describe what follows as prophetic, and that description is accurate in exactly the same sense that predicting a dropped brick will hit the floor is prophetic. This is not forecasting; it is fiscal physics. Banking costs have to fractionalise because they cannot grow indefinitely, pegged as they are by the overall GDP of the economies in which banks operate, since a bank cannot sustainably extract more from an economy than that economy generates, and as competing options multiply and client expectations reset around zero cost basics the cost structure of banking has only one direction to travel. Banks can stretch into more value added services to find new revenue pools, and many are doing exactly that, but those very services will in turn stretch back across into banking in order to fend off the encroachment, creating a convergence dynamic that ultimately accelerates rather than delays the reckoning. When saturation occurs, and it will, the clients will decide the outcome, and they will always lead with the same three things: simplicity, trust, and cost. Everything in this document follows from that single gravitational fact.

1. The Market Landscape: Understanding South Africa’s Banking Ecosystem

Before examining the pressures reshaping South African banking, it is essential to understand the current market structure. As of 2024, South Africa’s banking sector remains concentrated among a handful of large institutions, which together with Capitec and Investec held around 90 percent of banking assets in the country.

Despite this dominance, the landscape is shifting. New bank entrants have gained large numbers of clients, but client acquisition has not translated into meaningful market share, and this disconnect between account numbers and actual banking value reveals a critical truth: in an abundant market, acquiring accounts is easy, but becoming someone’s primary financial relationship is extraordinarily difficult. Everything that follows flows from that single observation.

2. The Incumbents: How Traditional Banks Face Structural Pressure

South Africa’s traditional banking system remains dominated by large institutions that have built their positions over decades, benefiting from massive balance sheets, regulatory maturity, diversified revenue streams including corporate and investment banking, and deep institutional trust built over generations.

However, these very advantages now carry hidden liabilities, because the infrastructure that enabled dominance in a scarce market has become expensive to maintain in an abundant one. It is worth distinguishing here between two tiers of traditional incumbent, a distinction that will matter greatly as consolidation unfolds. Tier 1 traditional banks have demonstrated digital execution capability and diversified revenue streams that buffer them against transactional fee collapse, while Tier 2 traditional banks remain more dependent on legacy infrastructure, slower technology execution, and revenue mixes that are more directly exposed to the fee compression underway. Both face pressure, but only one tier has a clear path forward on its current trajectory.

2.1 The True Cost Structure of Modern Banking

Running a traditional bank today means bearing the full weight of regulatory compliance spanning Basel frameworks, South African Reserve Bank supervision, antimoney laundering controls, and know your client requirements, while investing continuously in cybersecurity and fraud prevention systems that have evolved from control functions into permanent warfare operations, maintaining legacy core banking systems that are expensive to operate, difficult to modify, and politically challenging to replace, and supporting hybrid client service models that span physical branches, call centres, and digital platforms, each requiring different skillsets and infrastructure.

Add to this the ongoing costs of card payment rails, interchange fees, and cash logistics infrastructure, and the fixed cost burden becomes clear. These are not discretionary investments that can be paused during difficult periods; they are the fundamental operating requirements of being a bank, and they do not become cheaper simply because transactional revenue has collapsed.

There is also a structural moat embedded in South Africa’s Banks Act that is easy to underestimate until you try to cross it. No entity may conduct the business of a bank, accepting deposits from the general public, unless registered under the Act and authorised by the SARB’s Prudential Authority, with stringent capital, governance, and prudential requirements that no telecoms operator or retailer has been structured to meet. An operator can build a payments platform, a digital wallet, or a money transfer service, but it cannot hold deposits, extend credit from its own balance sheet, or participate directly in the national payments system without a licensed bank as intermediary. This constraint runs deeper than the licence itself, because holding deposits creates an asset and liability management obligation, a treasury function, credit underwriting capability, and a risk management culture that crossover entrants are simply not built around. That structural moat is the bank’s most underutilised strategic asset, a point this document returns to at length.

2.2 The Fee Collapse and Revenue Compression

At the same time that structural costs continue rising, transactional banking revenue is collapsing, as consumers are no longer willing to pay for monthly account fees, per transaction charges, ATM withdrawals, or digital interactions, and what once subsidised the cost of branch networks and back office operations now generates minimal revenue.

This creates a fundamental squeeze where costs rise faster than revenue can be replaced. The incumbents still maintain advantages in complexity based products such as home loans, vehicle finance, large credit books, and business banking relationships, all of which require sophisticated risk management, large balance sheets, and regulatory expertise that new entrants struggle to replicate. However, the incumbents are increasingly losing the day to day transactional relationship, and this is where client engagement happens, where financial behaviours are observed, and where long term loyalty is either built or destroyed, meaning that without this foundation, even complex product relationships become vulnerable to attrition over time.

3. The Crossover Entrants: Why Retailers, Telcos, and Insurers Want Banks

Over the past decade, a powerful second segment has emerged: non-banks launching banking operations. Retailers, insurers, and telecommunications companies have all moved into financial services, and understanding why requires cutting through quite a lot of boardroom rationalisation to find the two things that actually motivated the decision.

3.1 What Retailers Actually Want

Strip away the strategy decks and the ecosystem narratives, and retailers entering banking want exactly two things: they want to stop paying interchange fees on every card transaction that flows through their tills, and they want to market directly to their customers using real transactional data rather than fragmented loyalty programme guesswork.

These are genuinely compelling motivations and it would be wrong to dismiss them. Interchange costs at scale are material, running into hundreds of millions of rand annually for large grocery and general merchandise retailers, and the difference between knowing that a customer shops at your stores and knowing precisely what they buy, how often, at what price point, and how they respond to specific offers is the difference between broad awareness and actionable commercial intelligence. A retailer that can push a targeted promotion to 340,000 customers who regularly purchase a specific product category, timed to the moment those customers are paying at the till, has something meaningfully more powerful than a bar coded plastic loyalty card gathering dust in a wallet.

The problem is that neither of these objectives requires a full banking licence, since both require payment infrastructure and data capability rather than the full obligations of running a regulated deposit-taking institution. Building a bank is an enormously expensive and operationally demanding way to acquire both, and it turns out there is a far better answer, which the next section addresses.

3.2 The Partnership Answer: What a Modern Bank Can Deliver

A modern bank built on an API-first platform already has everything a retailer actually wants, and it can deliver all of it at close to zero marginal cost. The compliance infrastructure is already in place, the payment rails already run, the fraud operations already function, and the client trust relationship already exists. What that bank is missing is exactly what the retailer has: physical distribution at scale, merchant relationships, and the commercial context that makes targeted offers meaningful to a specific customer at a specific moment.

This architecture already exists in the South African market, and MTN’s MoMo platform illustrates it in practice: every rand moving through MoMo clears through African Bank, with the operator processing the transaction and the bank settling it, neither party having become the other. The operator provides reach and context, the bank provides the licensed settlement infrastructure, and that division of labour is not a workaround but the correct structure, one that the partnership model this document advocates for retailers extends directly.

A properly structured banking partnership gives the retailer realtime transaction insights with client consent under POPIA, providing precise visibility into which customers buy what, when, and at what price point without the retailer needing to build or manage the underlying consent framework. It gives the retailer the ability to deliver targeted vouchers, promotions, and contextual content directly through the banking app at the moment of payment, where the client’s attention is at its highest, enables digital receipts tied to actual verified transaction records that eliminate paper entirely, and through account to account payment rails such as PayShap can substantially reduce the per transaction cost relative to card scheme interchange fees without the retailer needing to operate, maintain, or comply as a payments institution.

The bank delivers all of this through an API and a consent management layer accessible to the retailer through a commercial partnership arrangement, with POPIA compliance sitting entirely with the bank, which already runs consent infrastructure at scale. The cost comparison between this model and building a bank is stark: building and operating a bank requires billions in upfront investment and hundreds of millions annually in compliance, fraud operations, technology, and staff, while a banking partnership delivers the same commercial outcomes for a fraction of this, structured as a revenue share or a flat commercial arrangement, giving the retailer the data and the direct marketing channel without the FICA audit, the SARB inspection, the fraud reimbursement liability, the Android malware problem, or the vendor renewal negotiation.

The economics from the bank’s side are equally compelling, since the marginal cost of exposing these capabilities to a retail partner through an existing modern platform is low, the bank gains distribution it would otherwise spend heavily to acquire, and it deepens the relevance of its platform in the daily transactional lives of its clients through the retail context. A client who uses their banking app to receive and redeem a grocery voucher at the till has a meaningfully stronger primary relationship with that bank than one who only sees their bank when they check their balance, so both parties win without either needing to do the other’s job.

This is also where the platform bank model finds its most commercially interesting expression, something the consolidation section returns to in detail. A bank that cannot win the primary consumer relationship by competing directly against the most dominant players might find an entirely viable and profitable role as the banking infrastructure behind retail distribution at scale, with the brand staying the retailer’s, the banking capability staying the bank’s, and the client relationship mediated by the consent framework that makes the whole arrangement work.

The retailers who will look most strategically astute in five years are not those who built banks but those who chose the right banking partner and extracted the data and payment benefits without ever needing to understand what a Basel III capital buffer is. Not every bank can be this partner, since the proposition requires a genuinely modern, modular technology stack with real API capability rather than a legacy core wrapped in middleware to look current, consent management infrastructure that satisfies POPIA and can mediate content delivery at scale, payment rails that are fast enough and cheap enough to compete with card schemes, and the commercial imagination to see retail distribution as an asset worth sharing technology capability for. Banks that can credibly offer this partnership have a powerful answer to the question of how they remain relevant as primary relationship competition intensifies.

3.3 What Retailers Get When They Build Instead of Partner

What happens when retailers ignore the partnership answer and proceed with the banking licence anyway is a story already being written across South Africa, and it is instructive.

What retailers discover, usually after the licence is approved and the vendor contracts are signed, is that they have not bought a bicycle but ordered a spaceship, and all they wanted to do was sell tins of beans and nappies.

Between the retail aspiration and the commercial reality sits an enormous and largely unexpected operational burden. FICA compliance is not a checkbox; it is a permanent, regulated, audited function requiring dedicated people, documented processes, and evidence that the bank knows exactly who its clients are and where their money comes from. Regulatory fines are not a distant theoretical risk; they are a near certainty for any institution that treats compliance as an afterthought while scaling rapidly. Fraud does not politely wait until a bank is operationally ready; it arrives on day one at full force, targeting every vulnerability in a newly launched platform. Cyber attacks are not a technology department problem to be managed quietly in the background; they are an existential operational risk that can shut down a bank’s systems, expose client data, trigger regulatory action, and destroy brand trust in a matter of hours, and Android malware targeting banking apps does not discriminate between a 20-year institution and a retailer that launched a banking app six months ago.

None of this comes cheap. Technology vendors who sell beautifully simple platform demonstrations charge something quite different at renewal time once a bank is operationally dependent and migration is painful, and payment operations teams, fraud investigation teams, compliance officers, regulatory reporting functions, and dispute resolution specialists are not contractors who can be scaled down when the project is complete but permanent headcount with permanent cost that have nothing to do with sourcing better avocados or negotiating shelf placement with consumer goods suppliers.

This is the part of the banking brochure that does not get presented to the board. The strategy session focuses on the data opportunity, the fee savings, and the integrated ecosystem, and it does not linger on what happens when a fraudster drains a thousand customer accounts on a Tuesday night, when SARB requests a compliance remediation plan, or when a banking platform vendor announces that the annual licence cost is increasing by 40 percent and the alternative is an 18-month migration project.

3.4 The Hidden Complexity All Crossover Entrants Underestimate

The retailer challenge described above is a specific instance of a broader pattern, because banking is not any other industry with a licence attached, and the operational complexity, regulatory burden, and risk profile of banking differ fundamentally from insurance, retail, and telecommunications in ways that every category of crossover entrant has discovered regardless of how thoroughly they believed they had planned for it.

Fraud, cybercrime, dispute resolution, chargebacks, scams, and client remediation are brutally complex ongoing challenges. Unlike retail where a product return is a process inconvenience, banking disputes involve money that may be permanently lost, identities that can be stolen, and regulatory obligations that carry severe penalties for failure. When a retail transaction fails it is frustrating, but when a banking transaction fails and money disappears it becomes a crisis that can devastate client trust and trigger regulatory scrutiny in ways that no amount of good marketing recovers from.

The experience of insurer led banks illustrates these challenges with uncomfortable precision. Building a banking operation requires billions of rand in upfront investment primarily in technology infrastructure and regulatory compliance systems, and banks launched by insurers have operated at significant losses for several years while building scale in a market already saturated with low cost options and fierce competition for the primary account relationship, leaving the margin for strategic error extraordinarily thin.

4. Case Study: Old Mutual and the Nedbank Paradox

The crossover entrant dynamics described above find their most striking illustration in Old Mutual’s decision to build a new bank just six years after unbundling a R43 billion stake in one of South Africa’s largest banks, a story that is not merely an interesting corporate finance case but a study in whether insurers can learn from their own history or are destined to repeat expensive mistakes.

4.1 The History They Already Lived

Old Mutual acquired a controlling 52 percent stake in Nedcor (later Nedbank) in 1986 and held it for 32 years, during which time Nedbank grew into a full service institution with corporate banking, investment banking, wealth management, and pan-African operations before Old Mutual’s board concluded in 2018 that managing this complexity from London was destroying value rather than creating it.

The managed separation distributed R43.2 billion worth of Nedbank shares to shareholders as Old Mutual reduced its stake from 52 percent to 19.9 percent, then to 7 percent, and today to just 3.9 percent, and the market’s verdict has been unambiguous, with Nedbank’s market capitalisation now at R115 billion, more than double Old Mutual’s R57 billion. Then, in 2022, Old Mutual announced it would build a new bank from scratch.

4.2 The Bet They Are Making Now

Old Mutual has invested R2.8 billion to build OM Bank, with cumulative losses projected at R4 billion to R5 billion before reaching break even in 2028, and to succeed they need 2.5 to 3 million clients of whom 1.6 million must be active with seven or more transactions monthly. They are launching into a market where Capitec has 24 million clients, TymeBank has achieved profitability with 10 million accounts, Discovery Bank has over 2 million clients, and Shoprite and Pepkor are both entering banking, with the mass market segment Old Mutual is targeting being precisely where Capitec’s dominance is most entrenched.

The charitable interpretation is that Old Mutual genuinely believes integrated financial services requires owning transactional banking capability, while the less charitable interpretation is that they are spending R4 billion to R5 billion to relearn lessons they should have retained from 32 years of owning Nedbank. The partnership model described in Section 3.2 was available to them, and a strategic arrangement with Nedbank, precisely the institution they chose to divest, could have delivered the transactional data and direct engagement capability they are now building at enormous cost instead of distributing R43 billion to shareholders and recreating a fraction of what they gave away.

4.3 The Questions That Should Trouble Shareholders

The resignation of OM Bank’s CEO and COO in September 2024, months before launch, suggests that the 32 years of Nedbank experience did not transfer to the new venture, leaving them learning banking again expensively with a new team in a more competitive market.

The competitive positioning is also difficult to defend. Discovery has pursued the integrated rewards and banking model for years with Vitality, while Old Mutual Rewards exists but lacks the behavioural depth and brand recognition, and competing against Discovery for integration while competing against Capitec on price is not a position but two positions simultaneously, with executing both well using a brand-new institution being exceptionally difficult.

Most fundamentally, what does success actually look like? If OM Bank acquires 3 million accounts but most clients keep their salary at Capitec, the bank becomes another dormant account generator, and the primary account relationship is what matters, with nothing else compensating for its absence.

4.4 What This Tells Us About Insurer Led Banking

The Old Mutual case crystallises the risks facing every crossover entrant: banking capability cannot be easily exited and re-entered, managed separations can destroy strategic options while unlocking short term value, and the mass market is not a gap waiting to be filled but a battlefield where Capitec has spent 20 years building structural dominance.

Most importantly, ecosystem integration is necessary but not sufficient, because the theory that insurance plus banking plus rewards creates unassailable client relationships remains unproven, and Old Mutual’s version of this integrated play will need to be meaningfully better than Discovery’s rather than merely present. Whether their second banking chapter ends differently from the first depends on whether the organisation has genuinely learned from Nedbank or is replaying familiar strategies in a market that has moved on, with the billions already committed suggesting they believe the former while the competitive dynamics suggest the latter.

5. Fraud Economics: The Invisible War Reshaping Banking

Fraud has emerged as one of the most significant economic forces in South African banking, yet it remains largely invisible to most clients until they become victims themselves. The scale, velocity, and sophistication of fraud losses are fundamentally altering banking economics and will drive significant market consolidation over the coming years, and for crossover entrants who believed banking was primarily a technology and distribution challenge, the fraud picture is the single most important thing they did not adequately model.

5.1 The Staggering Growth in Fraud Losses

The fraud landscape in South Africa has deteriorated at an alarming rate, and looking at the three year trend from 2022 to 2024 the acceleration is unmistakable, with more than half of the total digital banking fraud cases in those three years occurring in 2024 alone, according to SABRIC.

Digital banking crime increased by 86 percent in 2024, rising from 52,000 incidents in 2023 to almost 98,000 reported cases, and when measured by actual cases rather than just value, digital banking fraud more than doubled, jumping from 31,612 in 2023 to 64,000 in 2024. The financial impact climbed from R1 billion in 2023 to over R1.4 billion in 2024, representing a 74 percent increase in losses year over year. It is worth noting that an 86 percent annual growth rate is not a pace that continues indefinitely, since fraud growth eventually normalises as defences improve and criminal ecosystems mature, but what it signals clearly is that the baseline is now dramatically higher and any institution entering banking today inherits that elevated baseline immediately.

Card fraud continues its relentless climb despite banks’ investments in security, with losses from card related crime increasing by 26.2 percent in 2024 to reach R1.466 billion, and card not present transactions, which occur primarily in online and mobile environments, accounting for 85.6 percent of gross credit card fraud losses and highlighting precisely where criminals have concentrated their efforts.

Critically, 65.3 percent of all reported fraud incidents in 2024 involved digital banking channels, with banking apps alone bearing losses exceeding R1.2 billion and accounting for 65 percent of digital fraud cases. Total financial crime losses, while dropping from R3.3 billion in 2023 to R2.7 billion in 2024, mask the explosion in digital and application fraud specifically, and SABRIC warns that fraud syndicates are becoming increasingly sophisticated, technologically advanced, and harder to detect, setting the stage for what experts describe as a potential fraud storm in 2025.

5.2 Beyond Digital: The Application Fraud Crisis

Digital banking fraud represents only one dimension of the crisis, since application fraud has become another major growth area threatening bank profitability and balance sheet quality.

Vehicle Asset Finance fraud surged by almost 50 percent in 2024, with potential losses estimated at R23 billion, and this is not primarily digital fraud but involves sophisticated document forgery, cloned vehicles, synthetic identities, and increasingly AI generated employment records and payslips to deceive financing systems. Unsecured credit fraud rose sharply by 57.6 percent, with more than 62,000 fraudulent applications reported and actual losses more than doubling from the previous year to R221.7 million, demonstrating that approval rates for fraudulent applications are improving from the criminals’ perspective. Home loan fraud, though slightly down in reported case numbers, remains highly lucrative for organised crime, with fraudsters deploying AI modified payslips, deepfake video calls for identity verification, and sophisticated impersonation techniques to secure financing that will never be repaid.

5.3 The AI Powered Evolution of Fraud Techniques

The rapid advancement of artificial intelligence has fundamentally changed the fraud landscape. According to SABRIC CEO Andre Wentzel, criminals are leveraging AI to create scams that appear more legitimate and convincing than ever before, and from error free phishing emails to AI generated WhatsApp messages that perfectly mimic a bank’s communication style and even voice cloned deepfakes impersonating bank officials or family members, the traditional signals that helped clients identify fraud are disappearing.

SABRIC has cautioned that in 2025, realtime deepfake audio and video may become common tools in fraud schemes, with early cases already emerging of fraudsters using AI voice cloning to impersonate individuals and banking officials with chilling accuracy. Importantly, SABRIC emphasises that these incidents result from social engineering techniques that exploit human error rather than technical compromises of banking platforms, which means no amount of technical security investment alone can solve a problem that fundamentally targets human psychology and decision making under pressure.

5.3.1 The Android Malware Explosion: Repackaging and Overlay Attacks

Beyond AI powered social engineering, South African banking clients face a sophisticated Android malware ecosystem that operates largely undetected until accounts are drained.

Criminals are downloading legitimate banking apps from official stores, decompiling them, injecting malicious code, and repackaging them for distribution through third party app stores, phishing links, and legitimate looking websites. These repackaged apps function identically to the real banking app, making detection nearly impossible for most users, and once installed they silently harvest credentials, intercept one time passwords, and grant attackers remote control over the device.

The GoldDigger banking trojan, first identified targeting South African and Vietnamese banks, represents the evolution of mobile banking malware in that, unlike simple credential stealers, it abuses Android accessibility services to read screen content and interact with legitimate banking apps, captures biometric authentication attempts, intercepts SMS messages containing one time passwords, and records screen activity to capture PINs and passwords as they are entered, with its ability to remain dormant for extended periods and activate only when specific banking apps are launched making it particularly dangerous and difficult to detect with antivirus software.

Overlay attacks represent perhaps the most insidious form of Android banking malware. When a user opens their legitimate banking app, the malware instantly displays a pixel perfect fake login screen overlaid on top of the real app, and the user, believing they are interacting with their actual banking app, enters credentials directly into the attacker’s interface. These fake screens match the bank’s branding exactly, include the same security messages, and even replicate loading animations, so that by the time the user realises something is wrong, usually when money disappears, the malware has already transmitted credentials and initiated fraudulent transactions.

Unlike iOS devices which benefit from Apple’s strict app ecosystem controls, Android’s open architecture and South Africa’s high Android market share create a perfect storm for mobile banking fraud, since users sideload apps from untrusted sources, delay security updates due to data costs, and often run older Android versions with known vulnerabilities. Android variants hold roughly 70 to 73 percent of the global mobile operating system market share as of late 2025, and in South Africa this figure reaches approximately 81 to 82 percent of mobile devices.

For banks, this creates an impossible support burden, since when a client’s account is compromised through malware they installed themselves the question of who bears responsibility is genuinely unclear, and under emerging fraud liability frameworks like the UK’s 50:50 model, banks may find themselves reimbursing losses even when the client unknowingly installed malware, creating enormous financial exposure with no clear technical solution. The only effective defence is a combination of server side behavioural analysis to detect anomalous login patterns, device fingerprinting to identify compromised devices, and aggressive client education, and even this assumes clients will recognise and act on warnings, which social engineering attacks have proven they often will not.

5.4 The Operational and Reputational Burden of Fraud

Every fraud incident triggers a cascade of costs that extend far beyond the direct financial loss, requiring specialised fraud investigation teams working around the clock, management of call centre volume spikes as concerned clients seek reassurance, fulfilment of regulatory reporting obligations that have become increasingly stringent, and absorption of reputational damage that can persist for years and influence client acquisition costs.

Client trust, once broken by a poor fraud response, is nearly impossible to rebuild, and in a market where clients maintain multiple banking relationships and can switch their primary account with minimal friction, a single high profile fraud failure can trigger mass attrition. Complexity magnifies this operational burden in ways that are not immediately obvious. Clients who do not fully understand their bank’s products, account structures, or transaction limits are slower to recognise abnormal activity, more susceptible to social engineering attacks that exploit confusion about how banking processes work, and more likely to contact support for clarification, driving up operational costs even when no fraud has occurred. A bank with ten account types, each with subtly different fee structures and transaction limits, creates far more opportunities for confusion than one with a single clearly defined offering, meaning confusing product structures do not merely frustrate clients but actively increase both fraud exposure and the operational costs of managing fraud incidents.

5.5 The UK Model: Fraud Liability Sharing Between Banks

The United Kingdom has introduced a revolutionary approach to fraud liability that fundamentally changes the economics of payment fraud. Since October 2024, UK payment service providers have been required to split fraud reimbursement liability 50:50 between the sending bank and the receiving bank where the fraudster’s account is held, and under the Payment Systems Regulator’s mandatory reimbursement rules, UK PSPs must reimburse eligible clients up to £85,000 for Authorised Push Payment fraud with costs shared equally between sending and receiving firms, with the sending bank required to reimburse the victim within five business days of a claim being reported or within 35 days if additional investigation time is required.

This represents a fundamental shift from the previous voluntary system, which placed reimbursement burden almost entirely on the sending bank and resulted in highly inconsistent outcomes, with only 59 percent of APP fraud losses returned to victims in 2022, while the new mandatory system ensures victims are reimbursed in most cases unless the bank can prove the client acted fraudulently or with gross negligence.

The 50:50 split creates powerful incentives that did not exist under the old model, since receiving banks, which previously had little financial incentive to prevent fraudulent accounts from being opened or to act quickly when suspicious funds arrived, now bear direct financial liability, and this has driven unprecedented collaboration between sending and receiving banks to detect fraudulent behaviour, interrupt mule account activities, and share intelligence about emerging fraud patterns.

5.6 When South Africa Adopts Similar Regulations: The Coming Shock

When similar mandatory reimbursement and liability sharing regulations are eventually applied in South Africa, and they almost certainly will be, the operational impact will be severe for banks operating at the margins. The economics are straightforward and unforgiving: banks with weak fraud detection capabilities, limited balance sheets to absorb reimbursement costs, or fragmented operations spanning multiple systems will face an impossible choice between investing heavily and immediately in fraud prevention infrastructure or accepting unsustainable losses from mandatory reimbursement obligations.

For smaller challenger banks, retailer or telco backed banks without deep fraud expertise, and any bank that has prioritised client acquisition over operational excellence, this regulatory shift could prove existential. The UK experience provides a clear warning: smaller payment service providers and startup financial services companies have found it prohibitively costly to comply with the new rules, with some exiting the market entirely and others being forced into mergers or partnerships with larger institutions that can absorb the compliance and reimbursement costs.

Consider the mathematics for a subscale bank in South Africa: if digital fraud continues growing significantly and mandatory 50:50 reimbursement is introduced, a bank with 500,000 active accounts could face tens of millions of rand in annual reimbursement costs before any investment in prevention systems, which is simply not sustainable for an institution operating on thin margins with limited capital reserves.

The banks that will survive this transition are those that can achieve the scale necessary to amortise fraud prevention costs across millions of active relationships, since fraud detection systems, AI powered transaction monitoring, specialised investigation teams, and rapid response infrastructure all require significant fixed investment that is largely independent of whether a bank serves 100,000 or 10 million clients. Banks that cannot achieve this scale will find themselves in a death spiral where fraud losses and reimbursement obligations consume an ever larger percentage of revenue, forcing cost cuts that further weaken fraud prevention and create even more losses, a dynamic that will accelerate the consolidation already inevitable for other reasons.

The pressure will be particularly acute for banks that positioned themselves as low friction, high speed account opening experiences, since easy onboarding is a client experience win but also a fraud liability problem, and under mandatory reimbursement with shared liability banks will be forced to choose between maintaining fast onboarding and accepting massive fraud costs, or implementing stricter controls that destroy the very speed that differentiated them.

If a bank gets fraud wrong, no amount of free banking, innovative features, or marketing spend will save it, and trust and safety will become the primary differentiators in South African banking, with the banks that invested early and deeply in fraud prevention capturing a disproportionate share of the primary account relationships that actually matter.

6. Technology as a Tailwind and a Trap for New Banks

Technology has dramatically lowered the barrier to starting a bank, with cloud infrastructure, software based cores, and banking platforms delivered as services meaning a regulated banking operation can now be launched in months rather than years, a genuine tailwind that will embolden more companies to attempt banking. Retailers, insurers, fintechs, and digital platforms increasingly believe that with the right vendor stack they can become banks, and that belief is only partially correct, because technology has made starting a bank easier without making running one simpler.

6.1 Bank in a Box and SaaS Banking

Modern platforms promise fast launches and reduced engineering effort by packaging accounts, payments, cards, and basic lending into ready made systems, with common examples including Mambu, Thought Machine, Temenos cloud deployments, and Finacle, alongside banking as a service providers such as Solaris, Marqeta, Stripe Treasury, Unit, Vodeno, and Adyen Issuing. These platforms dramatically reduce the effort required to build a core banking system, and what once required years of bespoke engineering can now be achieved in a fraction of the time, but this is precisely where many new entrants misunderstand the problem.

6.2 The Core Is a Small Part of Running a Bank

The core banking system is no longer the hard part; it is only a small fraction of the total effort and overhead of running a bank, with the real complexity sitting in fraud prevention and reimbursement, credit risk and underwriting, financial crime operations, regulatory reporting and audit, customer support and dispute handling, capital and liquidity management, and governance and accountability. A bank in a box provides undifferentiated infrastructure, not a sustainable banking business.

6.3 Undifferentiated Technology, Concentrated Risk

Modern banking platforms are intentionally generic, meaning new banks often start with the same capabilities, the same vendors, and similar architectures, so technology is rarely a lasting differentiator, customer experience advantages are quickly copied, and operational weaknesses scale rapidly through digital channels. What appears to be leverage can quickly become fragility if not matched with deep operational competence and rapid scaling to millions of clients. Banking is not a hello world moment, and a new banking app has to come with significant and meaningful differences from the start while scaling quickly, since the ease of launching is not the same as the ease of operating and the gap between those two is where most of the casualties occur.

6.4 Why This Accelerates Consolidation

Technology makes it easier to start a bank but harder to sustain one, encouraging more entrants while ensuring that many operate similar utilities with little durable differentiation, and those without discipline in cost control, risk management, and execution become natural consolidation candidates. In a world where the core is commoditised, banking success is determined by operational excellence and the scale of the ecosystem clients interact with, not by software selection.

7. The Reality of Multi Banking and Dormant Accounts

South Africans are no longer loyal to a single bank, and the abundance of options and the proliferation of zero fee accounts has fundamentally changed consumer behaviour, with most consumers now maintaining a salary account, a zero fee transactional account, a savings pocket somewhere else, and possibly a retailer or telco wallet.

This shift has created an ecosystem characterised by millions of dormant accounts, high acquisition but low engagement economics, and marketing vanity metrics that mask unprofitable user bases. Banks celebrate account openings while ignoring that most of these accounts will never become active, revenue generating relationships.

7.1 The Primary Account Remains King

Salaries still get paid into one primary account, and that account, the financial home, is where long term value accrues, receiving the monthly inflow, handling the bulk of payments, and becoming the anchor of the client’s financial life. Secondary accounts are used opportunistically for specific benefits but rarely capture the full relationship. The battle for primary account status is therefore the only battle that truly matters, and no amount of zero fee positioning changes this.

8. The Coming Consolidation: Not Everyone Survives Abundance

There is a persistent fantasy in financial services that the current landscape can be preserved with enough innovation, enough branding, or enough regulatory patience, but it cannot. Abundance collapses margins, exposes fixed costs, and strips away the illusion of differentiation, and the system does not converge slowly but snaps, leaving the only open question as whether institutions choose their end state or have it chosen for them.

8.1 The Inevitable End States

Despite endless strategic options being debated in boardrooms, abundance only allows for a small number of viable outcomes.

The first end state is a small number of primary relationship banks that become default financial gravity wells, holding the client’s salary and primary balance, processing the majority of transactions, and anchoring identity, trust, and data consent, with everyone else integrating around them. These banks win not by having the most features but by being operationally boring, radically simple, and cheap at scale, and in South Africa this number is likely two, maybe three, not five and not eight.

The second end state is platform banks that own the balance sheet but not the brand. These institutions accept reality clearly, own compliance, capital, and risk, and power multiple consumer facing brands, with retailers, telcos, and fintechs riding on top while the bank monetises through volume and embedded finance. This is exactly the model that makes the banking partnership described in Section 3.2 commercially viable, since the bank becomes infrastructure, the retailer gets the data and the marketing channel, and neither party pretends to be the other. This is not a consolation prize but a clear-eyed reading of the situation, though it requires executives to accept that brand ego is optional, and most will fail that test.

The third end state is feature banks and specialist utilities, where some institutions survive by narrowing aggressively to become lending specialists, transaction processors, or foreign exchange and payments utilities, stopping their pretence of being universal banks and killing breadth to preserve depth. This path is viable but brutal, requiring the organisation to shrink, kill products, and let clients go, with few management teams having the discipline to execute this cleanly.

The fourth end state, and the most common, is the zombie institution, which is legally alive, holds millions of accounts, is nobody’s primary relationship, and bleeds slowly through dormant clients, rising unit costs, and talent attrition before eventually being sold for parts, merged under duress, or quietly wound down. This is not stability but deferred death.

8.2 The Lie of Multi Banking Forever

Executives often comfort themselves with the idea that clients will happily juggle eight banks, twelve apps, and constant money movement, but this is not how it works, because clients consolidate attention long before they consolidate accounts and the moment an institution is no longer default it is already functionally irrelevant to the client’s financial life even if the account remains open. Multi banking is a transition phase, not a permanent end state.

8.3 Why Consolidation Will Hurt More Than Expected

Consolidation is painful because it destroys illusions: that brand loyalty was real, that size implied relevance, and that optionality was strategy. It exposes overstaffed middle layers, redundant technology estates, and products that never should have existed, and the pain is not just financial but reputational and existential.

8.4 The Real Divide: Those Who Accept Gravity and Those Who Deny It

Abundance creates gravity, and clients, data, and liquidity concentrate around institutions that accept this reality, move early, choose roles intentionally, and design for integration, while those that resist it protect legacy, multiply complexity, and delay simplification until they are consolidated without consent.

9. The Traits That Will Cause Institutions to Struggle

Abundance does not reward everyone equally and is often brutal to incumbents and late movers because it exposes structural weakness faster than scarcity ever did. As transaction costs collapse, margins compress, and clients gain unprecedented choice, certain organisational traits become existential liabilities, and even the strongest incumbents carry some of these traits, with the question being whether they are actively being addressed or quietly protected.

9.1 Confusing Complexity with Control

Many struggling institutions believe that complexity equals safety, and over time they accumulate multiple overlapping products solving the same problem, redundant approval layers, duplicated technology platforms, and slightly different pricing rules for similar clients. This complexity feels like control internally, but externally it creates friction, confusion, and cost, and in an abundant world clients simply route around it without complaining, escalating, or giving notice before they leave. Committees spending three months debating whether a new savings account should offer 2.5 or 2.75 percent interest while competitors launch entire banks illustrates this trap precisely, because abundance rewards clarity rather than optionality.

9.2 Optimising for Internal Governance Instead of Client Outcomes

Organisations that struggle tend to design systems around committee structures, reporting lines, risk ownership diagrams, and policy enforcement rather than client experience, resulting in products that are technically compliant but emotionally hollow. When zero cost competitors exist, clients gravitate toward institutions that feel intentional rather than procedurally correct, and product launches requiring sign off from seventeen people across eight departments, none of whom actually talk to clients, are the symptom. Strong governance matters enormously in banking, but when governance becomes the product rather than the infrastructure behind the product, clients disengage.

9.3 Treating Technology as a Project Instead of a Capability

Struggling companies still think in terms of the cloud programme, the core replacement project, or the digital transformation initiative, funding technology in bursts, pausing between efforts, and declaring victory far too early. Winners treat technology as a permanent operating capability, continuously refined and quietly improved, and CIOs presenting three year roadmaps in PowerPoint while engineering teams at winning banks ship code daily captures the gap precisely. Abundance punishes stop start execution, and the market does not wait for the next funding cycle.

9.4 Assuming Clients Will Act Rationally

Many institutions believe clients will naturally rationalise their financial lives, closing unused accounts eventually, moving everything once they see the benefits, and optimising for fees and interest rates, but in reality clients are lazy optimisers who consolidate only when there is a clear emotional or experiential pull, not when spreadsheets say they should. Marketing teams celebrating 2 million account openings while finance quietly notes that 1.8 million are dormant and generating losses is the inevitable consequence of building a strategy on rational client behaviour, and companies that rely on this end up with large numbers of dormant, loss making relationships and very few primary ones.

9.5 Designing Products That Require Perfect Behaviour

Another common failure mode is designing offerings that only work if clients behave flawlessly, with repayments that must happen on rigid schedules, penalties that escalate quickly, and products that assume steady income and stable employment. In an abundant system flexibility beats precision, and institutions that cannot tolerate variance, missed steps, or irregular usage push clients toward simpler, more forgiving alternatives. Credit teams rejecting 80 percent of applicants to hit target default rates and then expressing surprise when growth stalls is a pattern that repeats across institutions that design for the model rather than for the human, and the winners design for how people actually live.

9.6 Mistaking Distribution for Differentiation

Some companies believe scale alone will save them through large branch networks, massive client bases, and deep historical brand recognition, but abundance erodes the advantage of distribution, and if everyone can reach everyone digitally then distribution without differentiation becomes a cost centre. Executives touting 900 branches as a competitive advantage are describing an asset that has become, for most clients, an inconvenience rather than a reason to stay.

9.7 Fragmented Ownership and Too Many Decision Makers

When accountability is diffuse, every domain has its own technology head, no one owns end to end client journeys, and decisions are endlessly deferred across forums, causing execution to slow to a crawl. Abundance favours organisations that can make clear, fast, and sometimes uncomfortable decisions, and running six different digital transformation initiatives in parallel, each with its own budget and none talking to each other, is not a strategy but expensive paralysis that competitors exploit daily.

9.8 Protecting Legacy Revenue at the Expense of Future Relevance

Struggling organisations are often trapped by their own success, hesitating to simplify, reduce fees, or remove friction because it threatens existing revenue streams, when abundance ensures that someone else will do it instead. Vetoing the removal of a R5 monthly fee that generates R50 million annually while ignoring that it costs R200 million in client attrition and support calls is not conservatism but delayed decline with a spreadsheet justification attached.

9.9 The Uncomfortable Truth

Abundance does not kill companies directly but exposes indecision, over-engineering, cultural inertia, teams working slavishly toward narrow anti-client KPIs, and misaligned incentives. The institutions that struggle are not usually the least intelligent or least resourced; they are the ones most attached to how things used to work. In an abundant world, simplicity is not naive but strategic.

10. The Traits That Enable Survival and Dominance

In stark contrast to the failing patterns above, the banks that will dominate South African banking over the next decade share a remarkably consistent set of traits.

10.1 Radically Simple Product Design

Winning banks offer one account, one card, one fee model, and one app, resisting the urge to create seventeen variants of the same product, so that product managers can explain the entire product line in under two minutes without charts or qualifying caveats. Complexity is a choice, and choosing simplicity against the internal pressure to add features requires discipline that most organisations lack.

10.2 Obsessive Cost Discipline Without Sacrificing Quality

Winners run aggressively low cost bases through modern cores, minimal branch infrastructure, and automation first operations, while investing heavily where it matters in fraud prevention, client support when things go wrong, and system reliability. Every rand is questioned, but client impacting investments move fast, and cheap does not mean shoddy but the ruthless elimination of waste while protecting the things that build trust.

10.3 Treating Fraud as Warfare, Not Compliance

Dominant banks understand fraud is a permanent conflict requiring specialist teams, AI powered detection, realtime monitoring, and rapid response infrastructure, with fraud teams having authority to freeze accounts, block transactions, and shut down attack vectors immediately without committee approval and without scripts. If you get fraud wrong nothing else matters, and the banks that have internalised this run their fraud operations accordingly.

10.4 Speed Over Consensus

Winning organisations make fast decisions with incomplete information and course correct quickly, shipping features weekly rather than quarterly, with teams choosing to disagree and commit rather than forming a working group to explore things further. Abundance punishes deliberation, and the cost of being wrong is lower than the cost of being slow, with the organisations that have internalised this shipping code while others are still writing the brief.

10.5 Designing for Actual Human Behaviour

Winners build products that work for how people actually live, with irregular income, forgotten passwords, missed payments, and confusion under pressure, and product teams spend time in call centres listening to why clients struggle rather than in conference rooms hypothesising about ideal user journeys. The best products feel obvious precisely because they assume nothing about client behaviour except that it will be messy and inconsistent.

10.6 Becoming the Primary Account by Earning Trust in Crisis

The ultimate trait that separates winners from losers is that winners are there when clients need them most, responding immediately with empathy and solutions when fraud happens, when money disappears, and when identity is stolen. Client support teams have real authority to solve problems on the spot rather than scripts requiring three escalations to accomplish anything meaningful, because trust cannot be marketed but must be earned in the moments that matter most, and institutions that invest in that capability compound it into the most durable competitive advantage in banking.

11. The Consolidation Reality: How South African Banking Reorganises Itself

South African banking has moved beyond discussion to inevitability. The paradox in the market, abundant options but shrinking economics, is not a transitional phase but the structural condition driving consolidation, and the forces shaping this are already visible in shrinking margins, collapsing transactional fees, exploding fraud costs, and clients fragmenting their banking relationships while never truly committing to any but one. Consolidation is not a risk; it is the outcome.

11.1 The Economics That Drive Consolidation

The system that once rewarded scale and complexity now penalises them, since legacy governance, hybrid branch networks, dual technology stacks, and product breadth are all costs that cannot be supported when transactional revenue trends toward zero, while compliance, fraud prevention, cyber risk, KYC and AML, and ongoing SARB supervision are fixed costs that do not scale with account openings.

Clients are not spreading their value evenly across institutions but fragmenting activity while consolidating value into a primary account, the salary account, the balance that matters, the financial home, with other accounts becoming secondary or dormant and offering little commercial value. This structural squeeze cannot be reversed by better branding, faster apps, or more channels, and there is only one way out: simplify, streamline, or exit.

11.2 What Every Bank Must Do to Survive

Survival will not be granted by persistence or marketing but earned by fundamentally changing the business model. Layers of committees and approvals must be replaced by automated controls and empowered teams, branch networks, legacy platforms, and duplicated services must be treated as liabilities to be actively reduced rather than assets to be maintained, and products must be consolidated so that clients receive clarity, predictability, and alignment with their financial lives rather than fifteen savings options and seven rewards models.

Old cores wrapped with new interfaces are stopgaps rather than solutions, and banks must adopt modular, API first systems that cut marginal costs, reduce risk, and improve reliability. Fees will survive only where value is clear: credit, trust, convenience, and outcomes rather than transactions. Fraud must be treated as a core determinant of economics rather than a peripheral compliance cost, and a bank that is never a client’s financial home will eventually become irrelevant regardless of how many accounts it holds.

11.3 Understanding Bank Tiers: What Separates Tier 1 from Tier 2

As introduced in Section 2, not all traditional banks are equally positioned to survive consolidation, and the distinction between Tier 1 and Tier 2 is not primarily about size or brand heritage but about structural readiness for the economics of abundance.

Tier 1 traditional banks have demonstrated digital execution capability with modern technology stacks either deployed or credibly in progress, diversified revenue streams that reduce dependence on transactional fees including strong positions in corporate, investment, or wealth management, cost structures that show evidence of active rationalisation, and proven ability to ship digital products at competitive speed while successfully defending or growing primary account relationships.

Tier 2 traditional banks remain more dependent on legacy infrastructure and have struggled to modernise core systems at pace, with revenue mixes more exposed to transactional fee compression, cost reduction efforts that have often stalled in governance complexity, technology execution that tends to be slower, more project based, and more prone to delays, heavy reliance on consultants, and primary account share that has eroded more significantly, leaving them more reliant on existing relationship inertia than active client acquisition. Tier 1 banks have a viable path to competing directly for primary relationships in the new economics, while Tier 2 banks face harder choices: accelerate transformation dramatically, accept a platform or specialist role, or risk becoming acquisition targets or zombie institutions.

11.4 Consolidation Readiness by Category

The table below summarises institutional categories, what each must change, and the relative effort required. The two digital bank categories warrant a brief clarification: Digital First Banks are mature scaled digital institutions that have already achieved primary relationship dominance, Capitec being the clearest South African example, while Digital Challengers are newer entrants that have acquired clients and built momentum but have not yet established a primary relationship position at scale and whose unit economics and fraud capability remain under pressure.

This readiness spectrum illustrates the real truth: institutions with scale, execution discipline, and structural simplicity have the best odds, while those without these characteristics will be absorbed or eliminated.

11.5 The Pattern of Consolidation

Consolidation will not be uniform. The most likely sequence begins with subscale and mutual banks exiting or merging because they are unable to amortise fixed costs across enough primary relationships, followed by digital challengers facing the binary choice of investing heavily or being acquired, since rapid client acquisition without deep engagement or lending depth is not sustainable in an environment where fraud liability looms large and fee income is near zero.

Traditional banks will then consolidate capabilities rather than brands, with large banks more often absorbing technology, licences, and teams than merging brand to brand and eliminating duplication inside existing platforms rather than through headline mergers. Foreign banks will ultimately retreat to niches, prioritising corporate and institutional services over mass retail banking in markets where the local consumer economics are unfavourable.

11.6 Winners and Losers

The likely winners are Digital First Banks with proven simplicity and low cost models, Tier 1 traditional banks with strong digital execution, and any institution that genuinely removes complexity rather than merely managing it. The likely losers are subscale challengers without lending depth, institutions that equate governance with safety, banks that fail to dramatically cut cost and complexity, and any organisation that protects legacy revenue at the expense of future relevance.

12. Back to the Future

Banking has become the new corporate fidget spinner: the object every large company feels it must have not because they have a clear reason for it, but because everyone else seems to have one and the boardroom hates the feeling of being left out. Most entrants do not know exactly why they want it, but they know others have it and so it should appear on the plan somewhere.

South African banking is no longer about who can build the most features or launch the most products, since it is about cost discipline, trust under pressure, relentless simplicity, and scale that compounds rather than collapses. The winners will not be the loudest innovators but the quiet operators who make banking feel invisible, safe, and boring, and in banking, boring done well is very hard to beat.

The consolidation outcome is not exotic but a return to a familiar pattern: a small number of dominant banks, which is exactly where we started, though the difference will be profound, since those dominant banks will be more client centric with lower fees, lower fraud, better lending, and simpler client experiences, and the retailers who wanted the data and the marketing channel will have found it through partnerships with those dominant institutions at a fraction of the cost of building their own.

The journey through abundance, with its explosion of choice, its vanity metrics of account openings, and its billions burned on client acquisition, will have served its purpose by forcing the industry to strip away complexity, invest in what actually matters, and compete on the only dimensions that clients genuinely value: trust, simplicity, and being there when things go wrong. The market will consolidate not because regulators force it but because economics demands it, and South African banking is not being preserved but reformed by clients, by economics, and by the unavoidable logic of abundance. Those who embrace the logic early will shape the future, while those who do not will watch it happen to them, and when the dust settles, South African consumers will be better served by fewer, stronger institutions than they ever were by the fragmented abundance that preceded them.

12.1 The Danger of Fighting on Two Fronts

There is a deeper lesson embedded in the struggles of crossover players that is worth stating plainly. Organisations that pour energy and resources into secondary, loss making businesses typically do so by redirecting investment and operational focus from their primary business, and this redirection is rarely neutral because it weakens the core. Every rand allocated to the second front, every executive hour spent in banking strategy sessions, and every technology resource committed to banking infrastructure is a rand, an hour, and a resource that cannot be deployed to defend and strengthen the primary businesses that actually generate profit today.

Growth into secondary businesses must be evaluated not just on its own merits but in terms of how dominant and successful the company already is in its primary business, and if you are not unquestionably dominant in your core market, if your primary business still faces existential competitive threats, if you have not achieved such overwhelming scale and efficiency that your position is effectively unassailable, then opening a second front is strategic suicide. It is like opening another front in a war when the first front is not secured: you redirect troops, split command attention, divide logistics, and leave your current positions weakened and vulnerable to counterattack, while your competitors in the primary business exploit the distraction rather than waiting for you to return.

This is importantly different from what Capitec is doing by expanding into mobile networks, since Capitec can do this because they have already won their primary battle so decisively that expansion becomes an overflow of strength rather than a diversion of it, leveraging surplus capacity that their dominant position generates rather than splitting focus. A telco entering banking because they fear disruption in their core market is a fundamentally different and far more dangerous strategic posture.

Institutions that have not yet won their core market, that are still fighting for primary account relationships, and that have not yet achieved the operational excellence and cost discipline required to survive in abundance cannot afford the luxury of secondary ambitions, and as this document has argued, even the secondary ambitions that appear most compelling often have a better, cheaper, and less operationally complex answer than ownership: a well-structured partnership with a bank that already has the infrastructure, the compliance, and the client trust.

12.2 The Closing Window: An Undeployed Weapon

South Africa’s convergence war has been fought on two fronts simultaneously, with operators pushing into financial services through payments platforms, digital wallets, and credit, while banks have pushed into connectivity through MVNOs, airtime, and data using the phone number as an anchor for the customer relationship.

What the operators cannot cross is the structural wall described in Section 2.1. The Banks Act constrains them to processing transactions rather than holding deposits, and MTN’s MoMo platform illustrates the architecture in practice: every rand moving through MoMo clears through African Bank, with the operator processing the transaction and the bank settling it, representing not a weakness in the operator model but the correct division of labour under South African banking law, one that no regulatory reform likely in this decade will change at its core.

The SARB has been working since 2018 to open South Africa’s national payments system to non-banking entities, and as of mid-2026 revised proposals are out for comment with the final Authorisation Framework expected in the third quarter of 2026. It is important to understand precisely what this reform delivers and what it does not: it delivers direct settlement rail access for non-bank payment service providers, removing the requirement for a bank sponsor at the transactional processing layer and giving MoMo and VodaPay greater operational independence in clearing and settling payments, but it does not deliver a deposit-taking licence, meaning the wall is being lowered in one section while the rest of it stands.

The deposit relationship, which encompasses the balance, the savings behaviour, the credit history, and the full financial profile of a customer built over years of banking, remains exclusively the bank’s, and this is the weapon that no South African banking MVNO has yet properly deployed. The existing model runs in the wrong direction: FNB’s eBucks, the closest South African example, rewards loyalty points for Connect spend redeemable across a range of products, so that when you transact you earn, which is a reasonable model but one that rewards spending activity rather than banking depth. The more powerful version inverts the relationship entirely, so that a qualifying deposit balance earns data allocation directly as a function of banking behaviour, with tiered thresholds delivering tiered allocations and the depth of the banking relationship determining the richness of the connectivity benefit. The mechanism is fully available today, and no South African banking MVNO has implemented it in this direction, almost certainly for organisational reasons rather than strategic ones, since the MVNO sits in one business unit, the loyalty programme in another, and the deposit franchise in a third, and the components have never been integrated in the direction that matters, not because of a technology problem but a governance and incentive problem of exactly the kind that Section 9 identifies as fatal in an abundant market.

The window is closing because payment reform is removing the bank sponsor dependency at the transactional layer, and once operators can clear and settle without a bank intermediary the current structural leverage diminishes. The banks that weaponise the deposit relationship through their connectivity product before that reform completes will have built something operators cannot replicate, while the banks that have not done so by the time the Authorisation Framework takes effect will have missed the moment when the asymmetry was most exploitable. The winners will be those who understood that dominance in one thing beats mediocrity in many, and who moved decisively while they still held an advantage their competitors could not structurally match.

13. Author’s Note

This article synthesises public data, regulatory reports, industry analysis, and observed market behaviour. Conclusions are forward looking and represent the author’s interpretation of structural trends rather than predictions of specific outcomes, and the author is sharing opinion without claiming any special insights or expertise in predicting the future.

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