Capitec eyeing more mid-income clients

28 May 2017 - 02:00 By RAY NDLOVU
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Capitec was once 'a small unloved stock'.
Capitec was once 'a small unloved stock'.
Image: WALDO SWIEGERS

From rural areas to high-end shopping malls, Capitec Bank has grown a comprehensive client base spread out across low- and middle-income earners.

Blue-collar workers, pensioners and a tech-savvy middle-class of young professionals have been attracted to its services.

Capitec client numbers grew by about 1.3million to 8.6million in the financial year ending February 2017 - an average of 100,000 new clients per month.

Francois Viviers, Capitec's marketing and corporate affairs executive, said this week the bank did not "discriminate" on income and gave all its clients the same level of service.

"We grew our footprint first in the rural areas and moved from there to urban areas, and now to high-end shopping malls. The result is that the low-income market segment was the first adopter of Capitec Bank and therefore represents a large share of our client base," he said.

The bank's slant towards inclusivity has been a huge drawcard for the low-income segment. Customers in this category earn less than R10,000 a month. Capitec has a 25% share of this market in the banking sector.

Those in the middle-income segment earn R10,000 to R30,000 a month, and Capitec customers account for 11% of this market, while among high-income earners - those earning R30,000-plus - Capitec's market share is 2%.

Renier de Bruyn, an investment analyst at Sanlam Private Wealth, said the strong growth in mass-market banking clients was providing Capitec with enough growth for the time being.

"At the moment, Capitec likely lacks the product suite to meet the needs of the over-R30,000 income market. They don't, for example, offer mortgages [but co-operate with SA Home Loans] or overdraft facilities. They also don't offer banking products for non-individual entities, such as trusts or companies," De Bruyn said.

Jaap Meijer, MD for research at Dubai-based Arqaam Capital, said a huge opportunity for the bank was in the middle-income segment.

It plans to double its market share by 2020 and is targeting a 30% market share of the middle-income market. "It identified opportunities in the SME segment, particularly as employed people are lending onwards to other family businesses," Meijer said.

Viviers said Capitec, despite its small market share of high-income earners, had managed to attract people who "do not find value in prestige banking solutions".

A Standard Bank consumer trends report for 2016 identified the lowest-income segment as primarily reliant on wages and salaries, which constituted 46% of total income, and social grants, which constituted 26% of total income. Total personal income in the segment was estimated at R3-trillion in 2016, up from R2.8-trillion in 2015, a nominal growth of about 7% year on year.

But economic pressures such as food and fuel price increases, rising unemployment and slower GDP growth have put a strain on cash availability for Capitec customers. This is reflected in the average account inflow, which has declined over the year to February.

Account inflows for low-income earners were on average R2,780 in February 2017, down from R2,985 in February last year. Those earning just over R5,000 had inflows of R4,895 in February this year, from R5,468 the prior February.

Middle-income earners taking home R10,000-plus had account inflows of R9,961, down from R10,933, while upper-middle-income earners earning R15,000 had inflows of R15,855, from R18,471.

Capitec said its clients used their accounts for daily transactions and saving for items such as holidays, education, medical expenses and long-term investments.

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