South Africa’s six largest banks are spending above inflation on technology — with cloud migration, artificial intelligence and cybersecurity the primary cost drivers — as they race to modernise core systems and fend off competition from digitally native challengers, according to PwC’s latest Major Banks Analysis.
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 delivered record earnings in several cases but faces a deeper strategic test: how to deploy AI at scale, compete with fintech players and build genuinely differentiated client relationships in an increasingly commoditised market.
Combined headline earnings grew 9.4% to R152.5-billion, with return on equity expanding to 20% and cost growth of 6.9% kept below operating income growth of 7.2%, creating positive operating leverage across the sector.
PwC said the major banks are moving beyond early AI experimentation, with management teams analysing use cases for generative and agentic AI across their operations. The focus areas mirror global trends: personalised banking experiences, real-time data intelligence, autonomous AI agents that handle tasks with human oversight, enhanced fraud detection and efficiency gains through automation.
Yusuf Bismilla, PwC South Africa’s digital trust partner, said AI is “increasingly viewed as a strategic business imperative” that can boost productivity, enhance decision-making and improve client and employee experiences “when deployed thoughtfully and at scale”.
“Maturity continues to develop across the industry as most banks continue to refine their approach as AI capabilities rapidly evolve,” Bismilla said.
Competitive battleground
But the regulatory dimension is intensifying. PwC noted that regulators globally are focusing on governance and trust frameworks around AI adoption, and that 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 — while building trust in the technology amid tightening oversight.
The major banks’ investment patterns remain focused on transitioning core systems to cloud compute capability, primarily by leveraging hyperscaler platforms, and on unifying systems across business segments, PwC said.
Read: Standard Bank IT bill tops R14-billion as software spending shifts
This is occurring against a backdrop of intense digital competition. Client acquisition and transaction volumes continue to increase, driven by mobile-first platforms, while new entrants in 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 on cloud migration, is tracking above inflation across the sector, with cybersecurity investment also flagged as a significant cost driver in a “highly competitive retail transactional banking environment”.
PwC said the future of banking is increasingly about ecosystem orchestration — owning the full client relationship and capturing activity across financial services and the broader lifestyle spectrum — rather than simply managing risk appetite and balance sheets.
With banking products across the retail, business and corporate spectrum increasingly commoditised, personalised client experiences have become the primary differentiator. Some banks have pivoted their internal structures to segment-based operating models, concentrating talent, systems and product innovation where customer demand is greatest while preserving scale efficiencies in back-office and shared services.
Francois Prinsloo, PwC Africa’s banking and capital markets leader, said the results reflect “broad-based balance sheet resilience, disciplined strategy execution and the ability of management teams to orchestrate their businesses through market turbulence and global headwinds”.
The deeper challenge, PwC said, is building differentiated client relationships, deploying AI at scale, competing with fintech players and ecosystems, and striking the right balance between cost efficiency and investment for growth. The next competitive cycle has already begun, with challenger banks making strong strides.
Regulatory complexity is also likely to intensify, with new requirements for first-loss-after-capital instruments and the finalisation of post-crisis Basel prudential reforms adding to compliance burdens alongside tightening anti-money laundering, data privacy and consumer protection rules.
Data-driven operations
Costa Natsas, PwC Africa’s financial services leader, said the major banks “continue to remind us why they are globally renowned for innovation, discipline and stability” but added that the industry must respond to forces redefining competitive advantage: the rise of AI- and data-driven operations; the convergence of banking with adjacent industries through embedded finance and ecosystem models; and the balance of sustainable finance as both regulatory imperative and commercial opportunity. — © 2026 NewsCentral Media
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