Authored By: Thandiwe Mabaso
University of the Western Cape
- Introduction
The rapid expansion of financial technology (fintech) has reshaped the delivery of financial services in South Africa. Digital lenders, mobile payment platforms, crypto-asset service providers, crowdfunding intermediaries and algorithm-driven advisory services increasingly operate alongside traditional banks.[1] This technological evolution has prompted an important legal question: Should fintech be classified as banking in South Africa?
The answer carries significant regulatory consequences. Banking institutions are subject to stringent prudential, capital and liquidity requirements under the Banks Act and the post-2017 Twin Peaks regulatory framework established by the Financial Sector Regulation Act (FSRA).[2] By contrast, fintech firms are regulated according to the specific financial activity they undertake, often under statutes such as the National Credit Act (NCA), the Financial Advisory and Intermediary Services Act (FAIS) and the Financial Intelligence Centre (FICA).[3]
This article undertakes a doctrinal and policy analysis of whether fintech should be classified as banking in South Africa. It examines the statutory meaning of ‘banking business’, the technological and functional characteristics of fintech, the judicial interpretation of banking and financial activities, similarities and differences between fintech firms and banks, and the regulatory logic underpinning South Africa’s financial architecture. It argues that fintech should not be classified as banking per se. Instead, South Africa’s existing activity-based and risk-sensitive regulatory model provides a more coherent and proportionate approach.
- The Legal Meaning of Banking in South Africa
Deposit-Taking as the Core Regulatory Trigger
The Banks Act defines ‘the business of a bank’ primarily as the acceptance of deposits from the public as a regular feature of business, combined with the employment of those deposits for lending or investment at the institution’s own risk.[4] The statutory concept of a ‘deposit’ includes amounts of money paid subject to an obligation of repayment.[5]
Section 11 of the Act prohibits any person from conducting the business of a bank unless registered as such.[6] Deposit-taking therefore operates as the principal regulatory trigger.[7] The rationale is systemic: banks engage in maturity transformation, converting short-term repayable deposits into longer-term loans. This exposes them to liquidity and solvency risks with potential macroeconomic consequences.
The prudential justification for banking regulation lies in safeguarding financial stability, depositor confidence and systemic integrity.[8] As the Basel Committee has observed, banks occupy a unique position in the financial system because of their interconnectedness and leverage.[9]
The Twin Peaks Model
The Financial Sector Regulation Act introduced the Twin Peaks model of financial regulation. Prudential supervision is entrusted to the Prudential Authority within the South African Reserve Bank (SARB), while market conduct oversight is exercised by the Financial Sector Conduct Authority (FSCA).[10]
Under this framework, banks must comply with capital adequacy standards aligned with Basel III, liquidity coverage ratios, governance obligations and ongoing supervisory reporting.[11] The intensity of regulation reflects the systemic significance of deposit-taking institutions.
The statutory framework thus establishes that ‘banking’ is not defined by the mere provision of financial services, but by a specific risk-generating activity which is the acceptance and deployment of public deposits.
- The Nature and Scope of Fintech
Fintech is not a legally defined category in South African law. Rather, it is a descriptive term referring to the use of technology to enhance or deliver financial services.[12] Fintech encompasses diverse activities, including Peer-to-peer (‘P2P’) lending platforms, Digital wallets and mobile payments, Robo-advisory investment services, Crypto-asset exchanges, Crowdfunding intermediaries, and Insurtech underwriting platforms.[13] The defining feature of fintech is technological innovation, particularly the use of artificial intelligence, distributed ledger technology, big data analytics and mobile connectivity, to improve efficiency, reduce transaction costs and broaden access to financial services.[14]
SARB has recognised fintech’s systemic implications through initiatives such as Project Khokha, which tested distributed ledger technology for wholesale interbank settlement.[15] Nevertheless, South Africa has not enacted a standalone ‘Fintech Act’. Regulation is activity-based. For example, a digital lending platform must register as a credit provider under the National Credit Act if it meets statutory thresholds.[16] A robo-advisor offering investment advice must comply with the Financial Advisory and Intermediary Services.[17] Crypto-asset service providers have been declared financial service providers under FAIS and are subject to licensing and conduct requirements.[18] All accountable institutions must comply with anti-money laundering obligations under the Financial Intelligence Centre Act.[19]
Fintech is therefore regulated not as an institutional category, but according to the specific financial activity and associated risk profile.
- Functional Similarities Between Fintech and Banks
Despite differences in legal form, fintech firms often replicate traditional banking functions.
Lending and Credit Intermediation
Banks extend credit using deposit-funded balance sheets. Similarly, P2P platforms facilitate lending between borrowers and investors.[20] Functionally, both enable credit allocation within the economy.
However, most P2P platforms do not lend from their own balance sheets; they operate as intermediaries matching lenders and borrowers.[21] This reduces direct credit risk exposure relative to banks.
Payments and Transaction Services
Payment processing is a core banking function. Digital wallets and mobile money services likewise facilitate transfers and electronic payments.[22] In many cases, fintech payment providers rely on bank infrastructure for settlement, operating within the national payment system regulated under the National Payment System Act.[23]
Although technologically distinct, both banks and fintech payment providers perform similar economic functions in enabling commerce.
Customer Data and Risk Assessment
Both banks and fintech firms conduct customer due diligence under FICA and assess creditworthiness using data analytics.[24] Fintech firms may utilise advanced machine learning algorithms, but the regulatory objective which is managing credit and compliance risk remains consistent.
- Structural and Legal Differences
While functional overlap exists, structural distinctions are significant.
- Absence of Deposit-Taking
The decisive distinction lies in deposit-taking. Most fintech firms do not accept repayable deposits as defined under the Banks Act.[25] Instead, customer funds are often held in segregated trust accounts with licensed banks.
Without deposit-taking and maturity transformation, fintech firms typically do not pose equivalent systemic liquidity risk. The prudential logic underpinning banking regulation therefore does not automatically apply.
- Capital and Liquidity Requirements
Banks must comply with capital adequacy and liquidity ratios to mitigate insolvency and contagion risk.[26] Fintech firms are generally not subject to Basel III-style capital requirements unless licensed as banks or insurers.[27]
Imposing identical prudential standards on fintech startups could create disproportionate compliance burdens and inhibit innovation, contrary to regulatory proportionality principles.
- Systemic Importance and Interconnectedness
Banks are central nodes in the financial system, deeply embedded in clearing and settlement infrastructure overseen by SARB. Fintech firms, although innovative, frequently depend on banks for payment rails and custodial services.[28] Their systemic footprint is typically narrower.
- Regulatory Theory and Policy Considerations
Modern financial regulation increasingly adopts a functional and risk-based approach. The principle of ‘same activity, same risk, same regulation’ advocates regulatory parity where risks are equivalent.[29]
South Africa’s Twin Peaks model reflects this philosophy. The FSRA empowers regulators to supervise institutions proportionately, focusing on systemic stability and fair treatment of customers.[30]
Classifying fintech as banking solely because it provides financial services would conflate technological delivery with institutional risk. Such reclassification could generate significant adverse consequences.
First, the blanket application of traditional banking standards to all fintech entities would likely result in over-regulation, imposing disproportionate capital adequacy, liquidity, and reporting obligations on firms whose risk profiles differ materially from deposit-taking institutions.[31] Second, heightened compliance burdens would raise barriers to entry, thereby reducing competition and entrenching incumbent banks at the expense of market dynamism and consumer choice.[32] Third, excessive regulatory rigidity could deter innovation by constraining technological experimentation, limiting the development of novel financial solutions that fintech firms are uniquely positioned to advance.[33]
Conversely, regulatory gaps must be avoided. Where fintech firms engage in deposit-taking or equivalent risk-creating activities, they should be subject to banking regulation. The existing statutory framework already captures such scenarios.
- Answering the Central Question
Whether fintech should be classified as banking depends on both statutory interpretation and regulatory policy.
Doctrinally, South African law defines banking by reference to deposit-taking and risk transformation.[34] Fintech, as a technological descriptor, does not inherently satisfy this definition. Many fintech firms provide financial services without engaging in maturity transformation or assuming deposit-based balance sheet risk.
From a policy perspective, proportionality and innovation are central considerations. South Africa’s regulatory architecture already permits supervisory intervention where fintech activities generate equivalent risks to banking.[35] The activity-based model avoids regulatory arbitrage while maintaining flexibility.
Accordingly, fintech should not be classified as banking as a general rule. Instead, regulation should continue to depend on the nature of the activity performed. Deposit-taking fintech entities must obtain banking licences; non-deposit-taking fintech firms should remain subject to sector-specific conduct and prudential requirements proportionate to their risk.
- Conclusion
Fintech and banking share important functional similarities in lending, payments and financial intermediation. Yet they differ fundamentally in legal definitions, systemic risk exposure, and prudential obligations. The South African framework anchored in the Banks Act and restructured under the Financial Sector Regulation Act draws a deliberate distinction between deposit-taking banks and other financial service providers.
Reclassifying fintech as banking would blur doctrinal clarity and impose disproportionate regulatory burdens. A functional, risk-sensitive and activity-based model better reconciles financial stability with technological innovation.
Therefore, fintech should not be classified as banking in South Africa. Rather, it should be regulated according to the specific financial activities it undertakes and the risks it generates. This approach preserves systemic integrity while enabling the continued evolution of South Africa’s digital financial ecosystem.
BIBLIOGRAPHY
Internet Source
International Monetary Fund. Monetary and Capital Markets Department, ‘South Africa: Financial Sector Assessment Program-Technical Note on Banking Regulation and Supervision’ (IMF eLibrary, 17 June 2022) < https://doi.org/10.5089/9798400214578.002 > accessed 24 February 2026.
Miranda Marquit ‘How fintech shapes everyday banking, payments, and investing’ (Britannica Money, 13 February 2026) < https://www.britannica.com/money/financial-technology-fintech > accessed 23 February 2026.
Nicholas Vine-Morris, ‘Legal Challenges and Regulatory Frameworks for Fintech Startups in South Africa’ (Spence Law, 5 June 2024) < https://www.spencelaw.co.za/post/legal-challenges-and-regulatory-frameworks-for-fintech-startups-in-south-africa > accessed 23 February 2026.
Nick Jain ‘What is Fintech Innovation? Definition, Innovations in Fintech and How Valuable is Fintech Innovation’ (Ideascale, 5 April 2024) <https://www.bing.com/ck/a?!&&p=> accessed 23 February 2026.
Lucía Pacheco, ‘Implementing the principle of “same activity, same risk, same regulation and supervision”: activity vs entity-based frameworks’ (BBVA Research, 14 October 2021) < https://www.bing.com/ck/a?!&&p=Y> accessed 24 February 2026
Sandeep Chakravadhanula, ‘How Bank-FinTech Collaboration is Powering Payment Innovation & Digital Banking’ (WNS, 25 August 2025) < How Bank-FinTech Collaboration Powers Payment Innovation > accessed 24 February 2026.
The Start Up Legal, ‘Peer-to-Peer Lending Platforms: How They Work and Legal Requirements’ (The StarUp Legal, 5 November 2024) < https://www.thestartuplegal.co.za/post/peer-to-peer-lending-platforms-how-they-work-and-legal-requirements > accessed 24 February 2026.
Journal Article
Likhit Mada, ‘The Rise of Mobile Payment Systems, Digital Wallets: Successes, Security and Challenges’ (2025) 13 European Journal of Computer Science and Information Technology.
Simphiwe K. Cele; Nhlanhla W. Mlitwa, ‘Fintechs in South Africa: Impact on regulation, incumbents and consumers’ (2024) 26 South African Journal of Information Management
News Paper
Dieketseng Maleke, ‘FSCA updates on licensing and supervision of crypto asset service providers’ The Star (South Africa, December 2025).
Law Research Paper
Ross P Buckley and others, ‘Building FinTech Ecosystems: Regulatory Sandboxes, Innovation Hubs and Beyond’ (UNSW Law Research Paper Series No 72, 2019).
Legislation
Banks Act 94 of 1990.
Financial Advisory and Intermediary Services Act.
Financial Intelligence Centre Act 38 of 2001.
Financial Sector Regulation Act 9 of 2017.
National Credit Act 34 of 2005.
National Payment System Act 78 of 1998.
Report
South African Reserve Bank, ‘Project Khokha: Exploring the Use of Distributed Ledger Technology for Interbank Payments Settlement in South Africa’ (Fintech Report 2018).
Standards
Basel Committee on Banking Supervision, Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems (Basel Framework Standards, Dec 2010 rev Jun 2011).
Working Paper
A Milne and V Lawack, Digital Assets in Payments and Transaction Banking (South African Reserve Bank Working Paper Series WP/24/20, 26 November 2024).
[1] Alistair Milne and Vivienne Lawack, Digital Assets in Payments and Transaction Banking (South African Reserve Bank Working Paper Series WP/24/20, 26 November 2024) 2.
[2] Banks Act 94 of 1990, ch vi.
[3] Nicholas Vine-Morris, ‘Legal Challenges and Regulatory Frameworks for Fintech Startups in South Africa’ (Spence Law, 5 June 2024) < https://www.spencelaw.co.za/post/legal-challenges-and-regulatory-frameworks-for-fintech-startups-in-south-africa > accessed 23 February 2026.
[4] Banks Act 94 of 1990, s 1.
[5] Ibid.
[6] Banks Act 94 of 1990, s 11.
[7] Banks Act 94 of 1990, s 1.
[8] Banks Act 94 of 1990, ch vi.
[9] Basel Committee on Banking Supervision, Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems (Basel Framework Standards, Dec 2010 rev Jun 2011) 7.
[10] Financial Sector Regulation Act 9 of 2017, ss 32–33.
[11] Ibid.
[12] Miranda Marquit ‘How fintech shapes everyday banking, payments, and investing’ (Britannica Money, 13 February 2026) < https://www.britannica.com/money/financial-technology-fintech > accessed 23February 2026.
[13] Ibid.
[14] Nick Jain ‘What is Fintech Innovation? Definition, Innovations in Fintech and How Valuable is Fintech Innovation’ (Ideascale, 5 April 2024) <https://www.bing.com/ck/a?!&&p=> accessed 23 February 2026.
[15] South African Reserve Bank, Project Khokha: Exploring the Use of Distributed Ledger Technology for Interbank Payments Settlement in South Africa (Fintech Report 2018).
[16] National Credit Act 34 of 2005, s 40.
[17] Financial Advisory and Intermediary Services Act 37 of 2002, s 7.
[18] Dieketseng Maleke, ‘FSCA updates on licensing and supervision of crypto asset service providers’ The Star (South Africa December 2025).
[19] Financial Intelligence Centre Act 38 of 2001, s 21.
[20] The Start Up Legal, ‘Peer-to-Peer Lending Platforms: How They Work and Legal Requirements’ (The StarUp Legal, 5 November 2024) < https://www.thestartuplegal.co.za/post/peer-to-peer-lending-platforms-how-they-work-and-legal-requirements > accessed 24 February 2026.
[21] Ross P Buckley and others, ‘Building FinTech Ecosystems: Regulatory Sandboxes, Innovation Hubs and Beyond’ (UNSW Law Research Paper Series No 72 2019) 19-14.
[22] Likhit Mada, ‘The Rise of Mobile Payment Systems, Digital Wallets: Successes, Security and Challenges’ (2025) 13 European Journal of Computer Science and Information Technology 137, 139.
[23] National Payment System Act 78 of 1998.
[24] Financial Intelligence Centre Act 38 of 2001.
[25] Banks Act 94 of 1990, s1.
[26] Financial Sector Regulation Act 9 of 2017.
[27] Basel Committee on Banking Supervision, Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems (Basel Framework Standards, Dec 2010 rev Jun 2011).
[28] Sandeep Chakravadhanula, ‘How Bank-FinTech Collaboration is Powering Payment Innovation & Digital Banking’ (WNS, 25 August 2025) < How Bank-FinTech Collaboration Powers Payment Innovation > accessed 24 February 2026).
[29] Lucía Pacheco, ‘Implementing the principle of “same activity, same risk, same regulation and supervision”: activity vs entity-based frameworks’ (BBVA Research, 14 October 2021) < https://www.bing.com/ck/a?!&&p=Y> accessed 24 February 2026.
[30] Financial Sector Regulation Act 9 of 2017, s 7.
[31] Simphiwe K. Cele; Nhlanhla W. Mlitwa, ‘Fintechs in South Africa: Impact on regulation, incumbents and consumers’ (2024) 26 South African Journal of Information Management 5-6.
[32] Ibid.
[33] Ibid.
[34] Banks Act 94 of 1990 s1.
[35] International Monetary Fund. Monetary and Capital Markets Department, ‘South Africa: Financial Sector Assessment Program-Technical Note on Banking Regulation and Supervision’ (IMF eLibrary, 17 June 2022) < https://doi.org/10.5089/9798400214578.002 > accessed 24 February 2026.
