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The Rise of Capitec

Capitec revolutionized South Africa’s banking landscape since it opened its doors in 1997.

Unlike the traditional banking giants—Absa, FNB, Standard Bank, and Nedbank— the new kid on the block Capitec focused on accessibility, affordability, and exceptional customer experience. By offering extended banking hours, low transparent fees, and embracing digital technology early on, Capitec appealed to tech-savvy customers and those previously underserved by the big banks.

This approach, along with great rates on savings, not only captured a large unbanked population but also convinced many to switch banks, leading to Capitec quickly becoming the largest bank in South Africa (based on client numbers).

In the past, before Capitec declared war on debt review,  many Debt Counsellors advised consumers entering debt review to open affordable Capitec Bank accounts.

New Competition in the Banking Sector

Capitec’s past success has inspired a wave of new entrants in the South African banking sector.

Digital banks like TymeBank and Bank Zero have emerged, targeting the same lower-income consumers with low, transparent cost structures.  TymeBank, in particular, has rapidly gained a 10% share of the primary bank market since its recent launch in 2019.

Read More: Check out this interview with the new TymeBank CEO

Additionally, traditional banks have responded by introducing more accessible and affordable accounts, such as Standard Bank’s MyMo and FNB’s Easy PAYU.

So Capitec find themselves squeezed by both the new and the old banks. This increased competition has intensified the battle for market share in the lower-income segment.

Capitec Taking Strain

Despite its impressive past growth, Capitec now faces significant challenges that could impact its previous market dominance.

The influx of new competitors (both local and international) really threatens its local market share.

Digital banks like TymeBank have now proven their ability to attract a substantial customer base quickly. This places Capitec under pressure in the lower-income market segment.

So now the pressure is on for Capitec to keep innovating so they can keep up with rapidly evolving technology and changing consumer preferences. Things like Ai and API integration etc are all important new features of banking (and most other services).

Capitec CEO Gerrie Fourie has also expressed concerns about potential further disruption from international giants like Apple and Facebook, who could also leverage their strong global brands and technological prowess to capture local market share. They have many users and ways for people to make payments.

‘There is no doubt about it Capitec are feeling the pressure and taking strain’

There is no doubt about it Capitec are feeling the pressure and taking strain as these new players nip at their heels. The way forward is going to be one of competition.

At the same time Capitec are feeling the strain of their existing credit clients struggling to repay what they have borrowed. With their limited credit offerings in the past this was not such a big concern but once they began offering more and more loans and credit they opened themselves up to greater risk.

With inflation and the post pandemic economy they are now having to make more and more provision for bad debt, something these newer players do not yet have to do.