Trends Reshaping SA's Banking Sector: Custom Software’s Role

Digital transformation in South Africa’s banking industry

Dean Spooner
February 27, 2024
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The South African banking sector is undergoing major changes as it adapts to emerging trends and an increasingly complex regulatory environment. Sub-Saharan Africa has continued on a significantly faster growth path than South Africa. The digital transformation journeys of the major banks continue to mature and yield a range of positive benefits for both the banks and their customers.

However, banks face the challenge of balancing competing priorities around costs, technology, regulations, competition, and talent acquisition. The sustainability agenda is also front and center, driving implications around emissions targets, reporting, disclosures, lending strategies, and risk management in light of Africa's climate change challenges. Strategic investments in custom software development will enable banks to address these sustainability concerns while thriving in this evolving landscape.

Looking ahead, banks will need to address key issues like the intensifying war for tech talent, the rise of digital assets disrupting traditional models, broadening regulations, high operating costs affecting profitability, and the struggle to enable seamless cross-border payments. The path forward will require optimising operations, enabling innovation, and improving agility through modern technologies.

The Race for Talent 

The war for talent is intensifying in South Africa's competitive banking sector. Skilled software developers and IT staff are in high demand. Banks are challenged to recruit and retain top tech talent to build competitive digital capabilities and customer experiences. Investing in training programs and partnerships with tech firms and universities can aid recruitment. Offering competitive compensation and career growth opportunities will be key retention strategies.

However, according to EY’s research, only around four in ten executives agreed that their organisational culture had a sense of urgency about change and transformation. The same number agreed that their culture encouraged innovation and new thinking. Banks will need to focus on fostering a culture that embraces change and innovation in order to fully leverage their tech talent and remain competitive.

Digital Assets Challenging the Status Quo

Cryptocurrencies and other digital assets are disrupting traditional banking. Digital assets are driving new measures of value in the banking industry and bringing with them new challenges and imperatives. Forward-thinking banks are starting to explore offerings in this space to meet changing consumer demands, though regulatory uncertainty persists. The banking sector is pivoting its business models to become the trusted custodian of all assets in the future, including digital assets.

Developing the technical capabilities to support digital asset offerings through custom software development will enable banks to keep pace with these trends. Building secure custody and trading platforms for cryptocurrencies and tokens will be key. Partnering with crypto startups and investing in blockchain expertise can accelerate banks' digital asset capabilities. Adopting digital assets also requires updating compliance protocols and risk management frameworks. Banks that can successfully integrate digital assets stand to gain market share and relevance. But they must carefully navigate the still-evolving regulations.

The Broadening Scope of Regulations 

Banks face mounting regulatory burdens, including more stringent capital requirements, consumer protection regulations, and data privacy rules. In addition, major trends like climate change, cybersecurity, and financial stability are driving a rapidly increasing regulatory perimeter for the banking sector. As a result, banks are increasingly having to adapt to this new landscape. This includes investing in compliance and risk management, fostering strong relationships with regulators, and developing regulatory frameworks that support innovation and growth.

Pressure to demonstrate regulatory compliance and mitigate risk is growing. Custom software solutions can help banks efficiently track compliance, while advanced analytics can uncover insights to guide regulatory strategies. Moreover, modern technologies such as generative AI and digitisation are emerging as potent tools to reshape the industry and help relieve the pressure that banks are currently facing due to these compliances.

By leveraging technology, banks can build compliance into processes, screen transactions, and quickly analyse regulatory data. Strong compliance and risk management capabilities will be key competitive differentiators for banks navigating the complex regulatory landscape ahead.

High Operating Costs are affecting Competition

Heightened competition and inflated operating costs are squeezing bank profits. Fintech startups and digital-first banks are disrupting the banking sector, forcing incumbents to compete on speed and customer experience. South African banks have some of the highest cost-to-income ratios in emerging markets, driven by bloated operating models and inefficient legacy IT systems.

Legacy IT systems and costly branch networks are a major drag on efficiency. Banks can leverage custom software solutions and cloud platforms to optimise operations, rationalise technology, and shift more services to digital channels. This can significantly cut costs while improving agility. Advanced analytics can also help banks glean customer insights to guide business decisions and personalise offerings.

By embracing new technologies like AI and leveraging agile software development, banks can rapidly roll out innovative features and products. Tighter integration between front-end systems and back-end infrastructure will enable greater efficiency. As banks modernise their technology stack, they can dramatically reduce operating costs while staying competitive against lean digital challengers. 

The Challenge of Seamless Cross-Border Payments

Providing fast, transparent cross-border payments is an ongoing struggle for South African banks. Achieving frictionless cross-border payments is massively relevant in the African context, with remittances critical to the economies of many rural areas and regions. Despite the growing number of innovative payment platforms, no existing solution has successfully integrated the key factors of accessibility, affordability, and trust.

The mobile money space is one of the most hotly contested sectors in the African start-up scene, but the fact is that no single player has yet managed to solve the perennial problem of making payments that are accessible, affordable, and trustworthy.

Complex processing, lack of standardisation, and outdated systems contribute to delays and excessive fees. Custom software built on blockchain and other innovative technologies can enable real-time payments across borders and currencies. By leveraging agile development methods, banks can rapidly prototype and deploy payment solutions that seamlessly connect previously siloed systems. This has the potential to unlock faster, cheaper remittances and new revenue opportunities while boosting financial inclusion across Africa. 


Banks in South Africa face mounting challenges, from increasing regulations to disruptive competitors. Strategic investments in custom software development will be essential for banks to thrive amidst this rapidly evolving landscape.

Custom solutions can help banks efficiently track compliance and analyse regulatory data as regulations continue to expand. New competitors like fintech startups are disrupting the sector, forcing banks to cut costs and modernise legacy IT systems to compete on speed and customer experience. Accessible, affordable cross-border payments also remain an ongoing struggle, though innovative technologies present potential solutions.

While talent shortages, shifting consumer expectations, and inflated operating costs add further complexity, custom software can enable banks to optimise operations, drive innovation, and improve agility. By leveraging agile development and technologies like AI and blockchain, banks can reduce costs, attract talent, and deliver cutting-edge digital experiences.

This recap touches on key challenges like regulations, competitors, payments, talent, and costs. However, these are not the only factors impacting South African banks. There are a range of other solutions and problems facing the industry as it undergoes massive transformation. But strategic investments in custom software development will be crucial for banks to successfully navigate this transition.

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