Risk and Security of Digital-only banks: perspective from Digital natives in South Africa

Abstract

The increasing adoption of technology has transformed various industries, including banking, where traditional services are now accessible through digital platforms. In South Africa, digital-only banks operate without physical branches, relying solely on digital infrastructure. While this presents opportunities, it also introduces risks such as cyberattacks, data breaches, and financial losses. Understanding these risks is crucial to fostering adoption, particularly among digitally active individuals. This study addresses a gap in existing literature, which largely focuses on general adoption factors rather than the security-specific concerns of digital natives in South Africa. Grounded in the Technology Acceptance Model (TAM) and Perceived Risk Theory (PRT), the research explores security and risk as key determinants of adoption. It also investigates measures that consumers and digital-only banks can implement to enhance security. A qualitative approach was employed, using semi-structured interviews with eleven digital natives selected through purposive sampling. Findings reveal that perceived security risks remain a key barrier to adoption, despite advancements in digital banking security. Threats such as social engineering and phishing persist due to low user awareness, while infrastructure challenges in underserved areas further hinder adoption. Despite perceptions of convenience and usability, digital-only banks are not widely seen as cost-effective. To enhance trust and adoption, digital-only banks must prioritise security awareness, transparency, and collaboration with stakeholders to address infrastructure gaps and cybersecurity threats. Strengthening consumer education and adopting advanced security technologies are essential for ensuring responsible digital banking adoption in South Africa.