Capitec’s R40 billion secret weapon

South Africa’s biggest bank by customers believes its enterprise payments segment will be one of the keys to its success going forward, with plans to invest heavily in this part of its business in the coming years.

Capitec CEO Graham Lee said that enterprise payments are one of the most important parts of the bank’s business for the future, saying it is a key enabler for South African companies.

Enterprise Payments is the division within Capitec that houses all of its segments that help other businesses accept payments, including debit order collection, merchant services, and e-commerce.

This has become an increasingly competitive space in recent years, with not only large players like Standard Bank and FirstRand’s FNB fighting for market share but also new, smaller entrants like fintech Yoco.

This growing competition comes as South Africa’s business banking battle is also heating up, with an increased number of players looking to expand their offerings.

The enterprise payments business has become particularly attractive for not only established financial services players like banks but also smaller fintechs, which have seen significant success in this market.

Businesses like Yoco and iKhokha have become household names by offering payment services to historically underserved segments of the market, such as small, medium, and micro enterprises.

This is the same segment Capitec and other companies are now targeting, with a particular focus on the country’s huge informal market, which the bank calls the “emerging market”.

This market houses businesses that operate similarly to companies in the formal market but are not formalised, like spaza shops and backroom rentals.

Several experts and big businesses, such as Capitec, Pick n Pay, and Tiger Brands, believe this market has immense potential.

Informal economy expert GG Alcock has estimated this economy’s value at between R600 billion and R750 billion.

Based on data from Capitec’s nearly 25 million clients, the bank estimates that around 9 million people are active in the country’s informal sector.

It, therefore, presents a potential goldmine for companies that are able to penetrate this notoriously overlooked and misunderstood market.

Aside from the historical difficulties faced in penetrating this market, with even powerhouses like Shoprite finding some trouble, the intense competition players now face makes this an uphill battle.

However, Capitec believes it has what it takes to not only penetrate this market but dominate with its business banking and merchant solutions offerings.

Building a juggernaut

In an interview with Daily Investor following the release of its latest results, Lee explained why Capitec’s Enterprise Payments business is so vital to the company’s success.

“There’s a very old saying in small business that revenue is vanity, income is the truth, but cash flow is life,” he said.

“And so, collection success is vitally important to growing small businesses, and that’s a big part, therefore, of enabling businesses to grow.”

“That’s why it’s really in support of our motivation and purpose to grow South Africa through growing business.”

This division has seen strong growth over the past few years, made clear in Capitec’s latest interim results for the six months ended 31 August 2025.

Capitec’s debit order business, Capitec payment services, grew by 19% in the six-month period, reaching 105 million in volumes, compared to just 71 million in August 2023.

Capitec Pay, the company’s e-commerce unit, saw even more impressive growth of 36%, reaching 130 million in volumes in August 2025 – more than double the 52 million it saw in August 2023. Net income from Capitec Pay also grew to R242 million.

A total of 9 million unique clients used Capitec Pay during the period, up from 6.2 million in the half-year prior, and payments with a value of R30.9 billion were processed, an increase of 52%. 

However, the crown jewel of Capitec’s Enterprise Payments division is its merchant solutions unit, which houses its card machine business.

Within this business, Capitec saw merchant turnover reach R42.4 billion over the six-month reporting period, up from R27.1 billion in August 2024.

Capitec’s number of trading merchants was up 165% to 85,281, and the business recorded R260 million average daily sales in August 2025, up 63% compared to 2024.

Interestingly, Capitec’s merchant commission income increased by 36% even though the average merchant commission rates decreased. 

This is due to a 57% increase in merchant turnover to R42.4 billion, as well as the significant increase in the number of trading merchants.

What sets Capitec apart in this market, which includes big players like Standard Bank and newer, smaller entrants like Yoco, is its merchant commission rates.

Capitec boasts the lowest merchant commission rates in South Africa after it reduced its rates and the price of its card machines earlier this year. 

Since lowering its prices in May 2025, Capitec has saved its merchants R95 million and sold 37,489 devices.

“We’re winning that business because we have a fantastic machine but also the lowest merchant commission rates in the country,” Lee said in the bank’s interim results presentation.

“One of the things that you can expect us in the future to spend a lot more time on and invest a lot more in is our enterprise payments business. It’s key to our success.”