Capitec’s success is a beacon of hope for new entrants as they eat legacy banks’ lunch

A branch of Capitec in Cape Town. Photographer: Armand Hough/ Independent Newspapers

A branch of Capitec in Cape Town. Photographer: Armand Hough/ Independent Newspapers

Published Apr 24, 2024


AS CAPITEC shot the lights out with its stellar annual results yesterday (Tuesday), it is a beacon of hope that the South African banking landscape is changing and it is possible to challenge the top five players.

The lunch of ye old South African monopolistic banking playground – dominated by Standard Bank, FirstRand, Absa, Nedbank and Investec – is up for grabs.

This has been in the works for years, but a plethora of new entrants to the South African landscape is giving customers more choice and if they have a beef with one lender it is easy to swop to another.

Standard Bank, for example, the country’s biggest bank by assets, has more than 18.8 million customers and a market value of R283 billion.

Since opening for business on March 1 2001, Capitec’s active client base grew 10% to 22 million with a value of R232bn.

It is a remarkable achievement. It stands as a lighthouse of hope to other entrants in showing that the seemingly impossible is possible in being able to challenge established players.

This week it was announced that Old Mutual had received approval to establish a bank, named OM Bank, subject to certain licence conditions. It aims to target the mass retail banking market and give Capitec, with its 22 million customers, a run for its money.

This as other new entrants – TymeBank, Bank Zero and Discovery Bank, among others – have started to eat legacy banks’ pie. In the past two years a resurgent African Bank has also been actively growing its stake in the mass retail market.

Healthy competition is vital for financial services, especially with the fast pace of innovation and artificial intelligence, which means new market entrants can leapfrog old traditional barriers to entry.

This as there is a clarion call to foster greater financial inclusion in South Africa, which often seems like a pipe dream, despite the plethora of banking choices now coming to the table.

Cosatu acting spokesperson Matthew Parks previously said: “Our banking and financial sector is rife with anti-competitive and monopolistic behaviour, a tendency to milk consumers with excessive bank charges, exploit banking workers with slave wages, and an ambivalence towards supporting job creation and local investments and procurement.”

He said many workers, the poor, the elderly, persons living with disabilities, those living in informal and rural areas and other vulnerable persons have long been red-lined by the mainstream commercial banks, leaving them unable or struggling to access banking and financial services.

President Cyril Ramaphosa this week too gave voice to this level of frustration that is echoed throughout the country and called for decisive action to reform South Africa’s economy and banking sector.

Ramaphosa, during his speech at the event hosted by the Minara Chamber of Commerce at Al Baraka Bank, highlighted how this dominance has particularly excluded Black South Africans from pivotal roles in the financial sector, as reported on by IOL.

To this end last year the president signed the South African Postbank Amendment Bill into law, saying it laid the foundation for a fully-licensed state bank geared towards ordinary consumers, in particular the poor and marginalised.

One only has to look at social media to get a taste of how maligned so many people feel towards these legacy banks.

This as banks pay out hefty remuneration packages.

Mike Brown, who departs as Nedbank’s CEO next month, saw his executive pay increase 6.3% to R46.42 million in total for the 2023 financial year, while Capitec’s CEO, Gerrie Fourie, raked in R65m for the 2024 financial year.

Of particular concern this week was Nedbank’s blithe and arrogant comments at how it had unbanked nearly 300 of its clients due to reputational risk.

It said such decisions were taken only after a rigorous assessment and an internal independent governance process with reference to all the relevant information and facts.

This as Nedbank, which was fingered in the Zondo Commission on state capture for transactions in which Gupta-linked firm Regiments Capital acted as a financial adviser to Airports Company SA, is well known to keep on banking companies with proven fraud against them and aims to unbank others, such as the Sekunjalo group of companies, including Independent Media which Business Report belongs to, despite no offences committed.

It is a very slippery slope and smacks of political interference.

Social media went wild. I almost thought I was going to wake up to a bloodbath when I heard that FNB was ordered by the High Court to shut former president Jacob Zuma’s bank account.

Emotions were running very high.

Closing a bank account is a threat to democratic rights and South Africans are not stupid. They don’t like it. They don’t like it all. Especially when there seems to be no transparency.

And at the end of the day, sentiment affects brands. And customers have more choices. The pace of change of the local banking landscape is picking up.

While Capitec is a giant 20 years since its launch, digital-only bank, TymeBank, which launched in 2019, currently boasts more than 8.7 million customers – a remarkable achievement.

So one thing is for sure – on the Monopoly play board that we know as SA Banking – new players have passed Go and are firing on all cylinders.

Players are moving, innovating and the only thing you can count on is banking for change.

Philippa Larkin, the content editor of Business Report.

Philippa Larkin is the Executive Editor of Business Report.