In November 2025, the Financial Sector Conduct Authority (FSCA) and Prudential Authority (PA) have released South Africa’s first comprehensive report on Artificial Intelligence (AI) in the financial sector which is a significant milestone for a rapidly evolving market. Drawing on more than 2 100 survey responses across banking, insurance, investments, payments and lending, the report offers a clear message: AI adoption is rising fast, but responsible usage must be the guiding force.
For Financial Services Providers (FSPs), the findings provide practical direction on how to adopt AI safely, ethically and in alignment with regulatory expectations.
According to the report:
- 52% of banks and 50% of payments providers already use AI, making them the leading adopters.
- Most institutions planned to invest under R1 million in 2024, signalling cautious, incremental deployment.
- In contrast, over 50% of banks plan to invest more than R20 million, reflecting higher digital maturity.
Across sectors, operations and IT remain the primary areas for AI and machine-learning applications, while sales and marketing lead in generative AI (GenAI) adoption.
AI Is Being Used For:
- Fraud detection and AML/CFT monitoring
- Internal process optimisation
- Cybersecurity enhancements
- Customer support (e.g., chatbots)
On the GenAI side, usage trends include:
- Customer-facing interactions
- Sales and product promotion
- Automated reporting and compliance assistance
The report highlights that data and analytical insights remain the highest perceived benefit across the sector, followed closely by productivity and operational efficiency.
Despite clear advantages, risks remain substantial and FSPs must be prepared to demonstrate how they will mitigate them. The most significant risk cited by institutions is data privacy and protection. This is especially relevant given POPIA’s strict requirements around processing personal information.
Cybersecurity risk is the second-biggest concern, reflecting the increased attack surface created by AI systems. There was also a concern regarding biased or non-representative data, inaccurate model outputs and low explainability, especially regarding GenAI. These challenges are increased when AI influences credit, underwriting, pricing or other consumer-impacting decisions. The single biggest constraint to AI adoption is insufficient talent and skills, followed by issues of transparency, explainability and data quality.
The FSCA and PA outline several expectations and lessons for responsible AI usage. FSPs should pay particular attention to the following strengthening governance by ensuring that they have frameworks for data governance, model risk management and board-level oversight.
Regulators emphasise that clear disclosure is expected when AI is used for decisions affecting customers, such as credit scoring or insurance pricing.
The FSCA and PA intend to coordinate with the Information Regulator to ensure alignment with POPIA’s privacy and fairness principles. FSPs must be able to demonstrate compliance, particularly where automated decision-making is involved.
The ethical use of AI especially fairness, transparency, and consumer protection is expected to be a strategic priority. Data privacy is the leading ethical concern across institutions.
For financial services providers that want to start using AI or expand its use, the report offers a step-by-step guide. It recommends starting small and focusing on the most important risks, investing early in good data quality and governance, clearly documenting models, decisions, and assumptions, and putting strong oversight in place. It also emphasizes building AI understanding among staff and customers, closely monitoring vendors and third-party tools, and ensuring AI systems are transparent.
AI adoption must align with the Treating Customers Fairly (TCF) principles and the broader market-conduct framework.
The FSCA/PA report signals a new phase for AI in South Africa’s financial sector where innovation must be matched with accountability. For FSPs, responsible AI adoption offers an opportunity to strengthen competitiveness, improve efficiency, and enhance consumer outcomes, which requires robust governance and a proactive approach to regulatory compliance.
Click on the links below to access the following documents:
- Artificial Intelligence in the South African Financial Sector Databook
- Artificial Intelligence in the South African Financial Sector Survey Questions
- Artificial Intelligence in the South African Financial Sector Survey Responses
- Financial Sector Conduct Authority and Prudential Authority Press Release