South Africa's six According to PwC's latest major bank analysis, the largest banks are spending above inflation on technology – with cloud migration, artificial intelligence and cybersecurity being the primary cost drivers – as they race to modernize core systems and fend off competition from digitally native challengers.
The analysis, which covers the combined results of Absa, Capitec, FirstRand, Investec, Nedbank and Standard Bank for the 2025 financial year, paints a picture of a sector that has achieved record earnings in many respects, but faces a deep strategic test: how to deploy AI at scale, compete with fintech players and create truly differentiated customer relationships in a rapidly growing market.
Combined headline income increased 9.4% to R152.5 billion, return on equity increased by 20% and cost growth of 6.9% was kept below operating income growth of 7.2%, leading to positive operating profit across the sector.
PwC said major banks are moving beyond early AI experiments, with management teams analyzing use cases for generative and agentic AI across their operations. The focus areas reflect global trends: personalized banking experiences, real-time data intelligence, autonomous AI agents that handle tasks with no human oversight, increased fraud detection and increased efficiency through automation.
Yusuf BismillahPwC South Africa's digital trust partner said AI is “being seen as a strategic business imperative” that can boost productivity, enhance decision making and improve customer and employee experiences “when deployed thoughtfully and at scale”.
“Maturity is evolving across the industry as most banks continue to refine their approaches as AI capabilities rapidly evolve,” Bismillah said.
competitive battlefield
But the regulatory dimension is intensifying. PwC noted that regulators globally are focusing on governance and trust frameworks around AI adoption, and scrutiny is likely to increase. The challenge for banks is to scale AI beyond pilots in areas such as credit decisions, customer service and operations, as well as build confidence in the technology amid tight monitoring.
PwC said the investment pattern of major banks is primarily focused on transforming core systems to cloud compute capability by leveraging hyperscaler platforms and integrating systems across all business areas.
Reading: Standard Bank's IT bill tops R14-billion due to changes in software spend
This is happening against the backdrop of intense digital competition. Customer acquisition and transaction volumes continue to grow, driven by mobile-first platforms, while new entrants to retail banking – with agile, cloud-based technology stacks – are challenging traditional pricing assumptions and reshaping expectations of what digital banking looks like.
IT spending, including cloud migration, is running above inflation across the region, with cyber security investment identified as a significant cost driver in the “highly competitive retail transaction banking environment”.
PwC said the future of banking is about organizing the ecosystem rather than just managing risk appetite and balance sheets – owning the full customer relationship and capturing activity across the financial services and broader lifestyle spectrum.
With banking products becoming increasingly commoditized across the retail, business and corporate spectrum, personalized customer experiences have become the primary differentiator. Some banks have transformed their internal structures to segment-based operating models, focusing on talent, systems and product innovation where customer demand is greatest while preserving scale efficiencies in the back-office and shared services.
Francois Prinsloo, banking and capital markets leader at PwC Africa, said the results reflect “broad balance sheet resilience, disciplined strategy execution and the ability of management teams to navigate their businesses through market turbulence and global headwinds”.
The deeper challenge, PwC said, is to create differentiated customer relationships, deploy AI at scale, compete with fintech players and the ecosystem, and strike the right balance between cost efficiency and investment for growth. The next competitive cycle has already begun, with challenger banks making strong progress.
Regulatory complexity is also likely to intensify, with new requirements for first-in-loss-after-capital instruments and the finalization of post-crisis Basel prudential reforms leading to tightening of anti-money laundering, data privacy and consumer protection rules as well as increasing compliance burdens.
data-driven operations
PwC Africa's financial services leader, Costa Natsos, said major banks “keep reminding us why they are globally renowned for innovation, discipline and sustainability” but added that the industry must respond to forces redefining competitive advantage: the rise of AI- and data-driven operations; Convergence of banking with adjacent industries through embedded finance and ecosystem models; and balancing sustainable finance as both a regulatory imperative and a commercial opportunity. — © 2026 NewsCentral Media
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