Capitec under siege from new South African banks

Over the past few years, South Africa has seen an influx of new entrants in the country’s banking market.

A common thread between many of these new entrants is that they are targeting South Africa’s lower-income and mass markets – a space that has been transformed and dominated by Capitec for years.

Launched in 2001, Capitec did what many other banks at the time refused to do and focused its short-term lending offering on lower-income, unbanked individuals.

At the time, this was a severely underserved part of South Africa’s market, as many banks did not consider it commercially viable.

Despite some bumps along the road, Capitec proved this assumption wrong, sticking to its strategy of targeting unbanked South Africans, not differentiating products based on income level, and developing easy-to-understand products.

Today, Capitec is the country’s biggest bank by client numbers, boasting around 25 million customers, and holds a significant share of the market.

It is also one of the most valuable banks in the country, with a R456 billion market cap on the JSE, thanks to an over 280,000% increase in the bank’s share price since its listing.

Capitec’s success attracted the attention of not only established players that have launched lower-cost offerings to expand their target markets, but also newer entrants looking to use the same playbook.

For example, Old Mutual’s newly launched banking offering, OM Bank, is targeting the 7 million customers sitting in the insurer’s Mass and Foundation cluster.

These individuals typically earn between R8,000 and R80,000 per month – a market segment dominated by Capitec and filled with smaller fintechs.

Many of these 7 million clients already have products with the insurer, such as funeral insurance or life insurance, giving it a significant head start compared to other new entrants.

Outside of financial services firms launching banks, South Africa has also seen an increase in retailers and fintechs entering the space.

Competition is heating up

It should be noted that new entrants in a market do not, as a rule, present serious competition for incumbents, especially in South Africa, where the banking market is dominated by a handful of strong players.

However, South Africa currently finds itself in an interesting space where notable players in other sectors, such as retail, are looking to expand into the banking market.

For example, Shoprite has steadily been developing its banking capabilities in recent years, with the aim of dominating money transfers between clients before mounting a full challenge to South Africa’s established banks.

This offering makes for a powerful avenue to attract unbanked or underbanked South Africans into Shoprite’s financial services network and build a client base that can rival traditional banks.

With over 2,800 retail stores in South Africa that serve as send and receive points for cash, Shoprite also has an immense physical footprint to distribute financial services products.

Bloomberg also recently reported that retail giant Pepkor plans to open bank branches in South Africa that offer zero-fee services.

Similar to Shoprite, Pepkor plans to use its 6,000-store network in South Africa to reach millions of lower-income customers.

The publication said Pepkor is likely to partner with Investec, though discussions are underway and there’s no certainty a deal will be reached.

While the entrance of these major companies in South Africa’s banking sector is worth keeping an eye on, newer, smaller entrants should not necessarily be overlooked.

South Africa has seen a fintech boom in recent years, with smaller players challenging incumbents in specific banking offerings, rather than launching full-service banks. 

For example, fintech Yoco has made a name for itself in the payment service segment of the market, taking on big players like Nedbank, Absa, FirstRand, Standard Bank, and Capitec.

By focusing on smaller businesses – an often underserved part of the business banking market – Yoco has managed to grow its customer base to 200,000 business owners since its launch in 2015.

Capitec ready for battle

Faced with increased competition and new entrants targeting its market, all eyes have been on Capitec to see how the bank will fend off new competitors and retain its dominance.

Capitec recently held an Innovation Exchange event, where it outlined how the bank plans to maintain and grow its share of the market.

At this event, the bank explained that technology will play a significant role in its service offerings going forward, with a particular focus on using technology to prevent and fight fraud.

The bank revealed that its artificial intelligence-driven security systems and human intelligence teams have already prevented more than R300 million in client fraud in 2025.

Capitec is in a highly advantageous position in South Africa’s banking space, as its 25 million clients – the highest number among the country’s banks – give it access to an enormous data set.

“We have always been a bank built for 95% of the population. Every transaction is a signal of what people value – and with trillions of data points, we can build solutions that reflect the real needs of South Africans,” CEO Graham Lee explained at the event.

This will also prove very useful to the bank’s relatively new business banking offering, which launched in 2023.

Lee explained that, in essence, all businesses want the same things from their bank – the ability to perform transactions seamlessly and inexpensively at scale, funding to support business growth, and high-quality service.

“That’s what most businesses need, and that’s what we’re doing. There’s quite a lot of complexity that goes into those outcomes, but what you will see is actually something quite simple,” he said. 

Lee added that the company is also focusing heavily on ensuring that small businesses, in particular, can open accounts easily with the introduction of its Entrepreneur Account offering.

This account will be linked directly to a Capitec client’s personal account, but keep business transactions separate from personal transactions at no extra cost.

Lee said this would allow small businesses to open an account “in minutes” and start building a business profile and credit score.

Another unique Capitec innovation that has proved highly successful for the bank in attracting business clients is keeping its fees the same across offerings.

Capitec charges the same fees for personal and business banking, allowing it to offer some of the most affordable services on the market while also attracting smaller business clients who cannot afford other banking services.

This focus on small businesses has seen Capitec use the same playbook it used to attract unbanked and lower-income customers when it first started, tapping into a large, underserved market.

However, this is not to say that Capitec limits itself to this market. For example, the bank’s event revealed that it is going after international travellers by eliminating international transaction fees on card payments.

This initiative started in October 2025 and, according to the bank, has already saved clients R55 million while simplifying international transfers to a flat R175 fee for over 50 countries.