Capitec’s clever plan

Capitec became the most popular bank in South Africa by taking an innovative approach—it did not call itself a bank and focused on its status as a financial service provider.

Capitec has consistently gained popularity for its innovative and disruptive approach to banking. It now has 22 million clients, around a third of South Africa’s population. 

It achieved this by offering a range of value-added products and services that enhance the overall banking experience for its clients, in addition to its core banking services.

When Capitec first came onto the scene in 2001, many overlooked the bank’s potential. At the time, South Africa’s banking sector was difficult to enter and dominated by four large players.

However, where many saw a closed door, Capitec saw a space rife for disruption, focusing on the 70% of South Africans who were unbanked at the time.

Capitec’s founders noticed that the available offerings from banks at the time were expensive and lacked transparency – another aspect Capitec could disrupt.

Therefore, Capitec based its business plan on four fundamentals: affordability, accessibility, personal service and simplicity.

This strategy proved more than successful. Over two decades later, Capitec is the largest bank in South Africa by client base and one of the best-performing stocks on the JSE.

Capitec CEO Gerrie Fourie explained at the Biznews Conference earlier this year that a large part of the bank’s continued success was due to its approach to the Covid-19 pandemic.

Unlike many other companies, Capitec chose to see the pandemic as an opportunity – where most others were downsizing, Capitec decided to change its mindset and focus on strategies to grow the company and its brand.

Fourie explained that, at the onset of the pandemic, Capitec realised it needed to re-budget. The company did not want to retrench employees, so opted to cut back on certain things.

“I said, ‘Let’s cut once and let’s cut deep.’ By May, it was finished, and we knew exactly where we were standing,” he said.

“We said, as a team, this is a massive opportunity because everyone else is thinking downscaling, and we actually changed our mindset to say how do we go in and actually create a digital opportunity and really grow to the financial needs of the clients.”

“If you look at the business now, compared to 2019 when we were actually pure retail, and we actually took a decision in 2017 to actually take the word ‘bank’” away – we are not Capitec Bank anymore, but we are Capitec, which is a financial services institution.”

The pandemic in 2020 allowed Capitec to focus on excelling within this strategy and grow the digital side of its business.

With the help of a newly established strategic initiative division, Capitec also honed in on its value-added services – a strategy that has played a large role in making the bank as successful as it is today.

The bank launched Capitec Connect, a mobile virtual network operator (MVNO), in September 2022.

Two of the service’s largest selling points were its comparably affordable prices and the fact that data bought from the service did not expire.

This service took off, and in 2023, the bank’s results revealed that it now boasts 1.25 million active SIMs and an average revenue per user of R77.

At the end of August 2023, more than 1.3 million Capitec Connect SIM cards had been issued. Fourie revealed at the company’s results presentation that 1.25 million of these SIMs are active subscribers.

Fourie told BusinessTech they are signing up around 120,000 new Capitec Connect subscribers per month.

The latest data shows that Capitec Connect generates R96 million monthly mobile revenue, equating to over R1 billion per year.

Capitec also allows clients to purchase airtime and data through its app. Today, it controls 32% of the airtime that is bought every month and has a 32% market share.

Alongside airtime and data, Capitec clients can also buy electricity through the app. Fourie said at the Biznews conference that 24% of the electricity South Africans buy is being sold through its apps and devices.

He said Capitec also offers cash-send services and controls about 30% of that market.

Another value-added service is vouchers, which customers can buy from 25 local retailers, including Pick n Pay, Dis-Chem, and Mr D, and send to others.

Fourie said this service has been extremely successful, with Capitec now selling about 10 million vouchers per month.

The company also launched Capitec Pay, a service that allows customers to buy products online without entering their banking details to prevent screen-scraping fraud.

This service has also been hugely successful, with the service now processing 20 million transactions a month.

Fourie explained at the conference that many of these services did not exist within the bank’s offering a year and a half ago but were far more recent developments.

Yet, he said these services had already added over R1 billion in net profit to the company’s bottom line.

The success of these services has prompted Capitec to launch even more. Its most recent value-added product was a partnership with Showmax.

In August this year, the companies announced a partnership through which Capitec clients can access the streaming service at a significant discount. 

The partnership allows the bank’s 12 million active app users to buy Showmax streaming vouchers on the Capitec banking app for only R22 a month – less than R1 a day. 

Capitec’s group executive for strategic initiatives, Henk Lourens, said, “At Capitec, we understand our clients’ needs and have partnered with someone who shares our proudly South African vision.”

“We want to make entertainment available anywhere and anytime at very affordable rates. We’ve partnered with Showmax to disrupt the entertainment landscape and create value for our clients.”

He said the bank’s clients will have access to entertainment for less than R1 a day, “and this is only the start of a very exciting journey with much more disruption to come!”

Capitec has also recently launched new insurance and business banking offers, with plans to disrupt both spaces using the same strategy it has used to disrupt the banking sector for the past two decades.

Capitec’s commitment to providing innovative and affordable financial services has made it a popular choice among South African consumers, who also remain loyal to the company thanks to these value-added services.

By offering value-added products and services like Showmax, EasyEquities, and Capitec Connect, Capitec is enhancing the overall banking experience for its clients.