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

The paper examines how digitising financial services can expand access to formal finance for underserved populations. It highlights South Africa's success in achieving high account ownership rates but argues that the focus must shift from simple access to 'quality financial inclusion'—emphasising productive usage, financial literacy, and the reduction of cash dependency in the informal economy. The author recommends a coordinated national strategy and enhanced public-private partnerships to address structural barriers and digital divides.

• Financial inclusion is an enabler of economic well-being and a tool for achieving several Sustainable Development Goals (SDGs), but it is not a sufficient condition on its own to reduce poverty; it requires complementary initiatives such as education and digital infrastructure.
• Digital financial services (DFS) offer three primary advantages—the 'holy grails'—which include reducing transaction costs for governments and users, utilizing 'micro big data' to create credit histories for the unbanked, and increasing governmental efficiency in social benefit payments.
• Despite the benefits, DFS introduce significant risks, including the potential for unethical exploitation of uninformed consumers, the creation of new forms of exclusion for those unable to afford smartphones, and increased vulnerability to phishing and data theft.
• South Africa has achieved high levels of formal financial inclusion, with 90% of adults formally served as of 2018, meeting the National Development Plan target. However, the author suggests the country may have reached a saturation point for basic transactional banking.
• There is a critical need in South Africa to move toward 'quality financial inclusion,' focusing on the productive use of accounts, increasing low levels of savings, and addressing over-indebtedness rather than just increasing the number of accounts.
• Several barriers hinder deeper financial inclusion in South Africa, including bank fees that are four times higher than in countries like Germany or India, a lack of trust due to past market misconduct, and a strong preference for trust-based informal models like stokvels.
• The South African government has successfully used digital solutions to curb fraud in social grants; the implementation of a biometric payment system helped the government save ZAR 800 million per year.
• South Africa's financial literacy levels are alarmingly low; the country ranked last out of 30 countries in a 2016 OECD survey measuring financial knowledge.
• 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 through mobile technology and satellite internet.
• Mobile money has become a primary driver of inclusion in Africa, with over 10 countries having more mobile money accounts than traditional bank accounts, though penetration varies significantly by region.

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} }