South Africa’s Poor Are Banked, But Still Financially Excluded

South Africa's financial inclusion story looks stronger on paper than it feels in the lives of many low-income households. Account ownership has expanded, regulatory reforms have lowered some barriers, and digital finance has opened new channels. However, millions remain unbanked or underbanked, and many who hold accounts use them only passively because costs, distrust, weak product fit, and digital exclusion still shape everyday financial behavior.

A new study in Risks by Loyiso Maciko of the University of South Africa asks a deceptively simple question: does regulation promote or impede financial inclusion in South Africa? Regulation can widen access when it is proportionate, coordinated, and designed around people's actual financial lives. It can also reinforce exclusion when it creates friction, privileges formal systems over community finance, or mistakes account ownership for meaningful participation.

Access rose, but meaningful inclusion remains unfinished

Financial inclusion is more than being able to open an account. It includes access, usage, and quality; whether services are available, actively used, affordable, suitable, convenient, and protected by fair consumer safeguards. This matters in South Africa because headline access figures conceal deeper gaps in financial behavior and welfare.

The paper notes that around 9% of South Africa's adult population, or about 3.9 million people, remains unbanked or underbanked. Even among those with accounts, 33% use them as "mailboxes," often because of poverty, a preference for cash, and the cost of using bank savings accounts. This is the gap between formal inclusion and functional inclusion: people may enter the system without gaining the tools, confidence, or economic value that financial inclusion is supposed to deliver.

The study links this challenge to South Africa's broader development agenda. Financial inclusion can help households smooth consumption, manage shocks, invest in livelihoods, access healthcare, support women's economic participation, and strengthen entrepreneurship. These links connect directly to SDGs on poverty, hunger, health, gender equality, decent work, and reduced inequality. But those gains depend on active and sustained use, not account statistics alone.

Regulation opened doors, then exposed the next barrier

South Africa's regulatory reforms have produced real gains. The post-2017 architecture, including the formal recognition of financial inclusion under the Financial Sector Regulation Act and the shift to a risk-based approach under anti-money laundering and KYC rules, helped reduce documentation burdens for low-risk customers. The study reports that account ownership rose from about 69% in 2017 to 85% in 2022, after only marginal progress under the earlier rules-based approach.

It shows that regulation can enable inclusion when it lowers entry barriers without abandoning financial integrity. Risk-based KYC allows institutions to match due diligence requirements to actual risk, rather than excluding low-income consumers through rigid paperwork demands.

The next barrier lies inside the system. Low-cost entry-level accounts often come with limited functionality, opaque pricing, ongoing fees, minimum-balance conditions, weak redress mechanisms, and service quality concerns. These frictions can turn access into frustration and account ownership into dormancy.

This is where consumer protection becomes vital to inclusion. The study's conceptual framework identifies trust, financial literacy, and cost as key channels through which regulation affects financial participation. Strong consumer protection can build confidence; weak enforcement, unresolved complaints, pricing opacity, unauthorized debit orders, and data privacy concerns can erode it.

Fintech widens reach while creating new exclusion risks

Fintech can reduce costs, expand reach, improve convenience, and increase competition. But digital-first inclusion can exclude people who lack smartphones, reliable internet, affordable data, or the skills needed to navigate online banking platforms.

The paper notes that only 52.3% of South Africans have access to reliable internet, making digital readiness a material constraint for low-income and rural communities. This turns fintech into a two-sided policy instrument. It can help people bypass branches and paperwork, while also shifting exclusion from the banking counter to the mobile screen.

The regulatory challenge is equally complex. Fintech firms can operate under lighter oversight than traditional financial institutions, creating asymmetries in compliance burdens, consumer protection, cyber-risk management, and operational safeguards. The study highlights the need to balance innovation with risk-proportionate supervision, rather than allowing fintech to grow in a grey zone or burdening it with rules that smother useful experimentation.

For South Africa, this means digital inclusion policy must include digital literacy, affordability, data access, cybersecurity standards, interoperability, and clear consumer redress. A mobile wallet or digital onboarding tool cannot become inclusive if the user cannot afford data, understand fees, recover from fraud, or trust the provider.

A stronger inclusion agenda must start from people's financial lives

South Africa already has financial systems that people use and trust outside the formal sector. Stokvels, savings groups, self-help associations, and community-based finance remain central to resilience for many households. Yet formal regulation only partially integrates these systems, leaving a fragmented ecosystem where trusted community finance and regulated formal finance often operate in parallel.

A better inclusion strategy would not treat informal finance as a problem to be replaced. It would explore safe bridges between community-based systems and formal services, while preserving the social trust and flexibility that make these networks valuable.

The study calls for financial education targeted at low-income, rural, and historically excluded communities, including practical content in school and tertiary curricula. It also urges product-suitability rules, revised credit-risk assessment databases, and financial products designed around irregular incomes, cash-flow volatility, and the needs of vulnerable groups, including women-owned micro-enterprises.

The study is a qualitative, document-based analysis, so it cannot establish causal links between specific regulations and inclusion outcomes. It also relies on public documents, which may understate implementation failures and underrepresent the lived experiences of financial service users. Still, its value lies in reframing the policy debate.

South Africa's financial inclusion agenda now needs to move from opening accounts to building usefulness. It means fair pricing, low-friction onboarding, stronger redress, digital capability, inclusive credit assessment, gender-responsive products, and better coordination among regulators.

Financial inclusion should give people more control over risk, opportunity, income, and resilience. South Africa has made progress in getting more people through the formal financial door. The harder work now is making sure what waits behind that door is affordable, trusted, useful, and designed for the realities of low-income lives.