Capitec under siege
Capitec’s success has put a target on its back, with competitors like TymeBank and the new bank from Old Mutual wanting to go after its market share.
Founded by Michiel le Roux in 1997, the largely uncontested bank has been so successful that it is recognised as South Africa’s best-performing share since 1994.
Over the past 20 years, Capitec has attracted over 22 million customers and has become the third-largest South African lender by market value despite its comparatively small asset holdings.
For reference, Capitec had assets worth R208 billion as of April 2024, while Standard Bank had assets worth R3 trillion.
Anchor Capital analyst Harry Botha says the bank still has meaningful growth potential over the next decade.
However, competitors like TymeBank and Old Mutual’s yet-to-launch OM Bank could throw a spanner in the works.
Old Mutual plans to launch OM Bank by the end of the year and target a market similar to Capitec’s.
Old Mutual filed its section 17 application earlier this year and received approval from the Prudential Authority to launch its bank in April 2024.
This comes just under two years after it received its banking licence from the Prudential Authority. It said it planned to break even in three years.
OM Bank will target the upper mass market and lower affluent customers who earn between R5,000 and R80,000 per month.
Built using 10x Banking’s cloud technology, Old Mutual says it can offer personalised, affordable, and flexible services to South African customers.
The company said building a bank is crucial to its plan to establish a fully integrated financial services ecosystem and its clients’ primary point of contact.
It added that having a bank to accept retail deposits would provide a cheaper source of funding.
Iain Williamson, Old Mutual CEO
Patrice Motsepe-funded TymeBank also poses a significant threat to Capitec. It offers affordable banking through its online platform and at in-store kiosks at major retailers.
TymeBank reached its first month of profitability in December 2023, making it the first digital bank in South Africa to break even.
“We are extremely proud of our achievement, particularly when you consider that globally, less than half of the top 100 digital banks are profitable,” said TymeBank CEO Coenraad Jonker.
“In fact, a recent study stated that less than 5% of all neobanks worldwide had reached profitability.”
Despite these threats, Capitec CEO Gerrie Fourie said he is more concerned about the competition international brands like Apple and Facebook could bring to the country’s banking space.
He said he isn’t concerned about OM Bank entering the market.
“Old Mutual has been a bank for quite a while. They rented a bank license. So, the offer has been exactly the same – they’ve been offering banking services,” said Fourie.
“They are now just getting their own banking license and their own banking system.”
To this end, Old Mutual has an unsecured lending product and the Old Mutual Money Account, with the latter being handled through a partnership with Bidvest Bank.
Fourie said he doesn’t expect much to change materially with Old Mutual’s offering. He added international players could disrupt the market in South Africa.
He said brands like Apple have well-known and strong trade names.
“If they come into South Africa with full banking, that’s a strong proposition,” he added.
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