South Africa’s banking industry is facing growing disruption as digital-first lenders Bank Zero and Pepkor’s upcoming PlusB position themselves to challenge the dominance of established institutions including Standard Bank, FNB, Nedbank and Absa with lower operating costs, faster innovation and technology-driven banking services.
Industry analysts say legacy banking infrastructure is becoming an increasingly significant competitive disadvantage for traditional lenders, whose ageing systems make it more expensive and time-consuming to launch new products compared with newer digital-only competitors.
According to Brandspur Banking News Desk, decades-old technology platforms continue to weigh heavily on many established banks, with outdated systems increasing operational complexity, extending product development timelines and raising the cost of maintaining banking services.
Financial services experts argue that many legacy banking platforms were not designed to support today’s digital banking environment, forcing institutions to build successive layers of technology over older systems. The result has been increasingly complex infrastructure that can delay the rollout of new financial products by as much as 12 to 18 months.
The operational burden has also increased compliance costs, prompting some financial institutions to adopt more flexible technology solutions capable of delivering regulatory services more efficiently while reducing expenses.
Digital banking entrants are seeking to capitalise on these challenges. Lesaka Technologies, which is progressing with its planned acquisition of Bank Zero, believes digital-first banking models provide structural advantages through leaner cost bases, faster product development and greater pricing flexibility than traditional banks.
The proposed acquisition, valued at R1.1 billion, received unconditional approval from South Africa’s Competition Tribunal, although the completion timeline has been extended into 2027 as the transaction moves through its final stages.
Meanwhile, retail giant Pepkor is advancing plans to establish its hybrid digital bank, PlusB, after acquiring technology assets to support the new banking business. The company expects the lender to achieve a return on equity exceeding 30% within its first five years while investing less than R1 billion in building the platform.
Pepkor also plans to leverage its extensive nationwide retail footprint, giving PlusB potential access to more than 2,500 physical locations across South Africa, a strategy that combines digital banking with broad customer accessibility.
The emergence of Bank Zero, PlusB and other digital challengers reflects a broader transformation in South Africa’s financial services sector, where technology, operational efficiency and customer experience are increasingly becoming key drivers of competition.
As digital banking adoption continues to accelerate, established financial institutions may face mounting pressure to modernise legacy systems, improve operational efficiency and accelerate innovation to defend market share against a new generation of technology-led banking competitors.
