How Capitec Became South Africa’s Biggest Bank
The consumer banking industry is notoriously difficult to enter, not least because most customers rarely switch banks. In some countries, people change spouses more often than they change banks.
The banking industry in South Africa was no exception; for decades the industry was dominated by “the Big Four” (Standard, FNB, Nedbank, and Absa). However, in 2000 a new player entered the industry, called Capitec, which started establishing branches rapidly. By 2007 it broke through the barrier of 1 million active customers; 10 years later it had more than 10 million clients and about 800 branches. It has now become the largest bank in the country.
The consumer banking industry is notoriously difficult to enter, not least because most customers rarely switch banks. In some countries, people change spouses more often than they change banks.
The banking industry in South Africa was no exception; for decades the industry was dominated by “the Big Four” (Standard, FNB, Nedbank, and Absa). However, in 2000 a new player entered the industry, called Capitec, which started establishing branches rapidly. By 2007 it broke through the barrier of 1 million active customers; 10 years later it had more than 10 million clients and about 800 branches. It has now become the largest bank in the country.
Importantly, profits kept pace. After breaking even in 2002, net profits continued to rise, to 3.8 billion rand in 2017 (about $260 million), while the company’s share price appreciated by a whopping 61,800% (from 117 to 72,500 rand). In 2016 The Lafferty Group ranked Capitec as “The Best Bank in the World,” a feat it repeated in 2017. Its customers seem to agree: Surveys indicate that Capitec has had the most-satisfied customers of all banks in the country — for the past five years running.
Capitec gets many things right in terms of its strategy, including its market positioning, internal operations, and organizational culture. Yet three things stand out that enable it to grow and prosper.
Resisting revenue temptations
Founder and chairman Riaan Stassen said to me: “Our strength has always been our focus.” Indeed, Capitec is more focused, in terms of what it does and does not do, than most companies and certainly most banks. It serves individuals only, not companies or trusts. It offers them a single account: Everybody gets a gold card with exactly the same conditions, prices, and services. A customer can do three things with this account: saving, loans, and transactions — and nothing else. The bank serves these customers through a network of highly efficient physical branches. It has always held on to this model and never wavered.
Companies, and certainly new entrants looking for growth, often find it difficult to resist jumping onto various new sources of revenue. That’s understandable, because if you are looking for growth, any piece of additional revenue seems welcome. Moreover, in advance, you can never be entirely sure that your original market choices will play out and will generate sufficient income by themselves. Hence, when a new potential stream of revenue presents itself, the company’s management feels it cannot afford to just leave it.