Biometrics and the future of payments in South Africa

South Africa’s biometric identity upgrade and digital payment reforms could drive inclusion — if privacy and access challenges are addressed.

In brief 

• South Africa’s new biometric ID system and payment reforms promise faster, more secure, and inclusive financial services. 
• Privacy, security, and equitable access remain critical challenges for widespread adoption. 
• Collaboration across sectors is essential to ensure technology enhances inclusion without compromising rights.

Unlocking inclusion and efficiency

South Africa stands at a pivotal moment in its financial evolution, with two key developments poised to reshape payments: the Department of Home Affairs' (DHA) biometric identity upgrade and the South African Reserve Bank's (SARB) acquisition of a stake in BankservAfrica.

Launched in April 2025, the DHA's system integrates fingerprints and facial recognition into the National Population Register, achieving error rates below 1% and significantly faster verification times.

Meanwhile, SARB's 50% acquisition of BankservAfrica, approved in August 2025 and rebranding it as PayInc SA, positions the operator of PayShap as a national utility, aiming to cut costs and boost interoperability.

These moves could foster a more inclusive digital economy, but they also raise nuanced concerns about privacy, security, and equitable access that must be addressed to realise their potential.

The biometric system promises to streamline customer authentication for banks, fintechs, and retailers, enabling quick, secure access to services. For the 30% of South Africans still unbanked, this could open doors to affordable digital payments, loans, and insurance, reducing reliance on cash and informal systems. PayShap, already handling over a million daily transactions, benefits from SARB's involvement by promoting open infrastructure, similar to how India's Unified Payments Interface (UPI) and Brazil's Pix have driven adoption through low-cost, interoperable platforms.

Global lessons: India and Brazil

In India, UPI's free model spurred exponential growth, processing billions of transactions monthly and boosting financial inclusion. Brazil's Pix achieved universal merchant acceptance by focusing on simplicity, cutting cash usage and enhancing economic resilience. South Africa could follow suit, with biometrics anchoring trust in these systems, potentially replicating such successes to stimulate GDP growth through efficient cross-border and domestic payments.

Barriers and risks

Yet, challenges persist. Public trust in digital payments remains low, with many preferring cash for its tangibility amid past scandals like data breaches. Affordability barriers—high smartphone and data costs, coupled with unreliable connectivity in rural areas—could limit benefits to urban elites, exacerbating inequality. More critically, biometrics introduce risks of abuse.

Privacy advocates in South Africa have voiced concerns over potential surveillance and data misuse, especially given the system's role in national security. Facial recognition technology, for instance, has shown biases against darker skin tones, potentially excluding or misidentifying Black South Africans, the demographic majority. Recent proposals by ICASA to link biometrics to SIM cards heighten these fears, as centralised data storage creates single points of failure vulnerable to hacks.

Global cautionary tales

Global examples underscore these digital ID risks in payments. India's Aadhaar, a biometric-linked ID system, has faced criticism for data leaks affecting millions, enabling identity theft and exclusion from services due to verification failures—issues like faulty fingerprints blocking access to subsidies.

In Brazil, Pix's rapid adoption has been marred by fraud spikes, with hackers exploiting vulnerabilities like deepfakes and cloned accounts, leading to losses in the hundreds of millions. These cases highlight how digital IDs, while efficient, can amplify cyber threats, with AI-driven fraud evolving faster than safeguards. In South Africa, without robust data protection—beyond the Protection of Personal Information Act—similar abuses could erode trust, deterring adoption and inviting authoritarian overreach. 

Building trust and safeguards

To mitigate these, regulators must enforce strict privacy protocols, including decentralised storage options and regular audits, drawing from Estonia's secure e-ID model.

Fintechs and banks should invest in multi-factor authentication beyond biometrics, while public education campaigns address fears. A radical shift could see the DHA's system evolve into a national "identity wallet," empowering users with control over their data and diminishing banks' gatekeeping role.

The path forward

Ultimately, technology alone won't define success; collaboration will. Banks, fintechs, regulators, and civil society must prioritise ethical implementation, ensuring biometrics enhance inclusion without compromising rights.

If South Africa navigates these tensions wisely, biometrics and digital payments could drive sustainable growth, fostering a resilient economy for all.