Capitec, the country's biggest bank by clients, says it is on its way to become a leading small and medium enterprises (SME) bank as it rolls out affordable "no-frills" banking services to the underserved emerging business segment.
Capitec's head of marketing, Francois Viviers, earlier this month said the bank aims to grow its business bank value proposition which focuses on addressing the gap in the market for SMEs including customers who have side hustles to supplement their incomes.
“We know that a significant number of our retail banking clients have side hustles, and the traditional banks have been excluding them because they have focused on the formalised businesses”.
He said the gap in the market is for emerging market businesses, which are SMEs looking to get access to simple, transparent and affordable banking.
“They want the ability to receive payments simply through a card machine or online, and most importantly, the ability to receive funding so they can grow. We are designing for that,” he said.
Viviers said SME banking is underserved by traditional banks, and Capitec wants to compete aggressively in the formal SME segment and win market share.
“We believe the opportunity is not just to win a big slice of the pie, but to grow the pie, to grow the market for formal banking for SMEs. In terms of what percentage share of the market share, there is no hard target. We want to be the leading bank for SMEs in South Africa in a short space of time.”
He said as part of the business banking value proposition transaction costs have been reduced to be in line with personal banking costs.
“The fundamental shift for us was to say, if you can pay R3.50 for a debit order on your personal account, or R1 for an electronic payment on your personal account, or swipe your card for free, why should you pay more for business banking, whereas traditional business banks charge businesses more.”
People in South Africa use cash. It is an ecosystem challenge, it is not an easy one to solve.
— Francois Viviers, Capitec head of marketing
He said the "no-frills" bank solution focuses on helping people in South Africa simplify their banking by extending to the informal sector.
“There are 1.5-million formal SMEs that we know are being banked, of which half pay tax. We think there is double that in the informal sector, and we have seen in our research there are people operating in township areas who provide fresh fruit to the market, who provide transport, who own a couple of hair salons or run shisanyamas that have high turnovers, all of it cash. They are not included in the formal banking space”.
Capitec boasts 20-million customers and 860 branches. It said the challenge in the informal sector is the use of mainly cash instead of digital transactions.
“People in South Africa use cash, especially in a market where people rely on taxis, rent rooms and buy from spaza shops which only receive cash. It is an ecosystem challenge, it is not an easy one to solve”.
Capitec has started a project in Thembisa to test how informal businesses can take advantage of the convenience that comes with a shift from cash to cashless transactions.
“We have partnered with a number of spaza shops and emerging businesses in Thembisa where we provide them with the ability to receive payments via card machines with low fees, as well as the ability to receive payments using PayShap.”
Cash not necessarily king
Viviers said while cash is mainly used in the informal economy it is not necessarily king, as it is expensive to manage.
“It is very expensive to insure and secure. The infrastructure that you need for cash ATMs — with load-shedding, the backup power supply, the security, the rental of the spaces, the cash in transit transport — all these are expensive infrastructure.”
Capitec, which was established in 2001, has expanded its credit offering, developed loans for education, home and vehicles, and has a funeral cover offering. Through Capitec Connect, the bank offers prepaid airtime and data that does not expire.
“We are tackling the conventional Mobile Virtual Network Operator by trying to do something that is simpler and significantly more affordable and easier to manage on the Capitec app”.
The group's digital clients increased 13% to 11.4-million in 2023, while Capitec Connect, has to date issued 500,000 SIM cards to subscribers.
Viviers said the bank's payment landscape had grown with digital payment solutions from cash and physical banking to digital banking, making the bank a leader in online payments.
“We are a very good barometer of how the market has shifted from bricks and mortar retail to e-commerce”.
The bank has introduced bill payments and recently added the ability to order vehicle licences, which get delivered in two to three days.
“Capitec today is fundamentally different to what it was five years ago, and we will continue to innovate as long as we can add value to our 21-million clients.”
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