In depth
Introduction
On 24 November 2025, the Prudential Authority of the SARB, in collaboration with the FSCA, published its joint report setting out key findings from the analysis exercise undertaken back in 2024, to better understand the opportunities and risks that the adoption of AI presents for the regulation and governance of South Africa’s financial sector ("Report").
Key findings and takeaways
According to the Report, banks are leading the charge in the adoption of AI, followed closely by fintechs. Other industries, such as the insurance sector, have been seemingly more cautious with their approach to the uptake of AI.
Although usage of AI solutions within the financial sector is increasing, the data presented by the FSCA have revealed that most financial institutions invested less than ZAR 1 million in AI for 2024. However, the Report indicates that more than 45% of the banks who participated in the study plan to invest more than ZAR 30 million in the adoption of AI going into 2026.
The Report also indicates that whilst traditional AI is being primarily used in the IT and operational divisions of the relevant financial institutions for the automation of routine tasks, to improve efficiency and reduce costs, generative AI is gaining steady traction in the sales, marketing and customer support divisions, for the purposes of document automation and ultimately transforming how these institutions are interacting with customers. AI is also being used to detect fraud and money laundering, in an effort to better protect both financial institutions and their customers.
Key benefits and risks of AI adoption for the financial sector
The key benefits reported on for both financial institutions and customers is that the adoption of AI within the financial sector will lead to better data insights, faster service and enhanced security. AI can assist in the analysis of large data sets which can lead to the development of more enhanced and personalized product offerings for customers, as well as improved customer service by freeing employees to better attend to customer needs, whilst routine and administrative tasks are handled by AI.
Although AI can certainly aid in the enhancement of security for financial institutions, the adoption of AI poses significant security risks to financial institutions. Certain guardrails will need to be implemented in order to safeguard financial institutions’ data, which includes customer data and personal information. Financial institutions still have an obligation to comply with laws such as POPIA and they have a duty to ensure that any use of AI within their organization is done in a manner that’s compliant with POPIA – which will be the biggest, albeit necessary, hinderance to financial institutions fully exploiting the benefits that AI has to offer.
The Information Regulator recently announced that almost 2,000 data breaches have been reported in South Africa since April 2025, which marks a notable 40% increase from 2024. This begs the question as to whether the growing adoption of technologies such as AI have contributed to this increase in cyber threats. This may be as a result of one of the other key challenges identified in the Report, which is that there is a shortage of skilled AI professionals within these financial institutions to properly guide the institutions through the AI adoption process.
The way forward
In order for financial institutions and customers to fully benefit from the adoption of AI, the Report indicates that trust and ethical governance needs to be at the forefront. Financial institutions will have to put clear governance frameworks in place to protect data, ensure fairness and be transparent in the way that AI is being used.
The Report further states that financial institutions are calling for a principle-based regulation, which is focused on outcomes and fairness rather than by way of rigid rules. There will have to be strong collaboration between the various regulators, including the Information Regulator, and the financial sector in order to achieve this. The FSCA and Prudential Authority plan to further engage stakeholders and align financial sector efforts with national AI strategies.
Our team attended the Africa Fintech Festival held in Johannesburg this week, where these topics were front and center in the discussions being had. We eagerly await further outcomes and discussions around the SARB’s Payment Ecosystem Modernization Program (PEM), which is the SARB’s flagship initiative to modernize the national payments landscape, and how AI may play a role there.
The adoption of AI is certainly transforming South Africa’s financial sector, promising smarter, faster, and safer services. The Report highlighted the benefits of AI in the financial sector, allowing financial institutions to offer bespoke products and services, and to support business growth. However it is also clear that the use of AI in the financial sector presents unique challenges. Regulators and institutions must collaborate to build a trustworthy, client-focused AI future.
