In a country where a significant percentage of the population cannot afford a bank account, a ‘budget bank’ is challenging the market share of the ‘big four’ lenders, and is the driving force behind a price war.
Capitec Bank has doubled its numbers in five years and quadrupled in market value, against a background of a stalling economy and recession.
It appears to have done so by focusing on ‘no-frills’ banking with low fees that ensure greater accessibility, and by steering clear of higher-risk financial products such as mortgages and vehicle finance that the ‘big four, Standard Bank, FirstRand, Barclays Africa and Nedbank, offer.
‘Closing in on the Big Four’
Investors in Capitec have seen high returns, with shares rising more than 300% since 2012, including 30% this past year alone, and the bank is now has a market value of 103bn rand (US$7.9bn), compared with the fourth largest, Nedbank, valued at 110bn rand.
Capitec, which launched in 2001, now has nine million customers, with almost half of those classified as “primary customers” — that, is, customers who have their salaries paid directly into the bank.
“Most of them we’ve taken from other banks,” Capitec chief executive Gerrie Fourie (pictured left) told Reuters, saying that each month the bank is signing up between 100,000 and 150,000 new accounts.
“The economy is helping us,” he added. “People have started questioning why they have to pay banking costs.”
It’s a good time for customers of the traditional ‘big four’ to query their bank charges as the banks are being forced to fight back to protect market share.
Nedbank now offers bank accounts with charges that are just half of what it imposed in banking costs five years ago.
“Capitec came from zero, to being a big player,” Feroz Basa, head of Old Mutual’s Global Emerging Markets Fund, told Reuters. “It’s centered around this low-cost model, that’s how they are gaining market share.”