Digitising Financial Services: A Tool for Financial Inclusion in South Africa?

This research paper examines the role of digital financial services (DFS) in promoting financial inclusion, with a detailed case study on South Africa. It explores the global benefits and risks of digitisation, South Africa's progress toward its National Development Plan targets, and the broader opportunities for digital financial transition across the African continent.

• Financial inclusion is an enabler of economic well-being but is not a sufficient condition on its own to reduce poverty; it requires complementary developmental initiatives such as education and physical and digital infrastructure.
• Digital financial services (DFS) offer three primary advantages, often termed 'holy grails': the reduction of transaction costs for governments and users, the creation of 'micro big data' to improve credit risk assessment, and increased governmental efficiency in delivering social benefit payments (G2P).
• The digitisation of financial services introduces significant risks, including the potential for unethical exploitation of uninformed consumers, the creation of new forms of exclusion for the elderly or those unable to afford smartphones, and increased vulnerability to phishing and data theft.
• South Africa has largely met its National Development Plan target of 90% formal financial inclusion, with 90% of adults formally served as of 2018. However, a significant portion of the population remains under-served, with 64% of adults not saving and a high reliance on informal mechanisms.
• Despite high account ownership, South Africa faces barriers to deeper digital adoption, including bank fees that are four times higher than in countries like India, Germany, and Australia, and a pervasive fear of fraud, which is the primary reason users avoid digital channels.
• The South African government has successfully used digital solutions to reduce fraud and costs in its social grant system. The implementation of a biometric payment system helped the government save ZAR 800 million per year.
• South Africa's financial literacy levels are critically low; the country ranked last out of 30 nations in a 2016 OECD survey measuring financial knowledge, which constrains the use of sophisticated financial services.
• Africa is uniquely positioned for a digital transition due to its young population (median age of 18) and the ability to 'leapfrog' traditional infrastructure gaps using mobile technology and satellite internet.
• Mobile money has become a primary driver of financial inclusion in Africa, with over 10 countries on the continent having more mobile money accounts than traditional bank accounts.

APA

SHIPALANA, P. (2019). Digitising Financial Services: A Tool for Financial Inclusion in South Africa? South African Institute of International Affairs. https://saiia.org.za/wp-content/uploads/2019/10/Occasional-Paper-301-shipalana.pdf

Chicago

SHIPALANA, PALESA. Digitising Financial Services: A Tool for Financial Inclusion in South Africa? South African Institute of International Affairs, 2019. https://saiia.org.za/wp-content/uploads/2019/10/Occasional-Paper-301-shipalana.pdf.

Wikipedia

{{cite report |last1=SHIPALANA |first1=PALESA |title=Digitising Financial Services: A Tool for Financial Inclusion in South Africa? |publisher=South African Institute of International Affairs |date=September 2019 |url=https://saiia.org.za/wp-content/uploads/2019/10/Occasional-Paper-301-shipalana.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{shipalana2019digitising, author = {SHIPALANA, PALESA}, title = {{Digitising Financial Services: A Tool for Financial Inclusion in South Africa?}}, institution = {South African Institute of International Affairs}, year = {2019}, month = sep, url = {https://saiia.org.za/wp-content/uploads/2019/10/Occasional-Paper-301-shipalana.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }