A new paper by the Reserve Bank argues that South Africa’s market-driven approach to open banking is limited in its reach.
In fact, it risks entrenching the same socioeconomic barriers that have locked large sections of the population out of the financial system.
The newly published working paper (PDF) argues that a regulated approach is needed to address issues such as digital and financial literacy and access to technology where these are lacking.
Open banking allows users to share their banking information – or relevant portions of it – between financial institutions to facilitate easier access to financial products and services.
In South Africa, this has helped drive financial inclusion by allowing fintechs such as Yoco, Lulalend and MTN’s MoMo to use their access to banking data to build products and services for previously underserved parts of the population.
“The profile of the typical open banking user – predominantly middle-aged, employed and relatively educated – suggests that uptake remains uneven across socioeconomic groups. This underscores the importance of complementary policies that address structural barriers to participation, including gaps in digital skills and uneven technological infrastructure,” said the working paper.
“The evidence also points to potential exclusionary effects, particularly in credit-targeted open banking models.”
Structural issues
The paper was authored by Lwanga Nanziri, senior lecturer at Stellenbosch University and research fellow at the Reserve Bank specialising in development finance; Paul Gbahabo, a development finance consultant; and Daniel Ofori-Sasu, a finance economist and regulatory specialist from the University of Ghana Business School.
The advent of open banking has led to a vibrant fintech ecosystem in South Africa, leading to innovative products services suited to various segments of the economy. Despite this, structural issues persist that the authors argue require regulation to address effectively.
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The success of open banking in South Africa is closely tied to rising digital penetration, mostly through mobile technology as the main delivery mechanism for new financial solutions. As a result, the factors limiting digital uptake among the populace are the same ones restricting the growth of financial inclusion through open banking.
“Increased reliance on digital platforms, algorithmic decision-making and complex financial products may disadvantage individuals with low digital literacy, limited access to technology or thin credit histories. Without appropriate safeguards, open banking could inadvertently reinforce existing inequalities, even as it expands aggregate access,” the paper said.
The paper compares South Africa to 15 other countries, including Singapore, the UK, the US and emerging markets such as Nigeria and Brazil. South Africa is among a minority of six countries – including Kenya, New Zealand and the US – that have opted for a market-driven approach. Within that group, Singapore uses a hybrid model while Canada is transitioning from a market-driven to a regulated approach. Regulated markets include Australia, Brazil, the EU and the UK.
The authors advocate for South Africa to adopt a hybrid, regulator-led model anchored by the Reserve Bank, with mandatory data-sharing standards, consumer consent protections, API interoperability rules and parallel public investment in digital literacy. Security is another important aspect highlighted in the paper, with the protection of consumer data seen as a key priority of any regulatory effort.
While acknowledging that South Africa’s open banking ecosystem is robust – with good enabling legislation such as the Protection of Personal Information Act – the authors argue that rapid changes in the digital landscape have raised questions about potential gaps in the law. Third-party providers and APIs (application programming interfaces), which fall outside current regulatory purview, are two examples.
The call for regulatory intervention is described more as the need for tweaks in the right direction than as an indicator that the market-driven approach has failed. To the contrary, the working paper shows that open banking has increased financial inclusion, especially among women – 59% of open banking users are female and there is an almost even split between urban and rural areas. A regional analysis paints a different picture, however, with Gauteng and the Western Cape leading adoption while the Eastern Cape, KwaZulu-Natal and Limpopo lag.
Consumers are not the only beneficiaries of a more successful open banking ecosystem. According to the paper, information sharing through the open banking model allows new entrants into the market, creating opportunities for start-ups, fintechs and tech companies that aim to disrupt traditional finance models and increase financial inclusion.
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“While the current market-led approach has facilitated innovation, a more structured regulatory framework may be necessary to ensure consumer protection, data security and equitable access. Moving towards a regulator-led or hybrid model would allow clearer standards for data sharing, explicit consent mechanisms and broader interoperability across financial services providers,” said the paper. – © 2026 NewsCentral Media
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