Why Capitec really launched a cellular service provider

Capitec launched a mobile virtual network operator (MVNO) because it could provide the bank with a wealth of data about consumers and ensure it could compete against the technology companies entering financial services.

This is according to author TJ Strydom in his latest book, Capitec: Stalking Giants, who wrote that Capitec CEO Gerrie Fourie told him this in an interview.

After a meteoric rise to 22 million customers in 2024, Capitec could no longer grow as fast as it had in the past twenty years.

However, Fourie told Strydom that they saw many opportunities for future growth.

“We started as a microlender, then a bank, then a tech-digital business,” Fourie said.

“And now you begin to shift to a data business, where data drives almost everything.”

He explained that the bank’s large pool of clients and number of transactions it processes provided the bank with roughly two trillion data points.

This allows it to better understand customer behaviour, assess their risk, and grant them credit at the best possible price.

“Shoprite, Checkers, and Pick n Pay know what you buy. We know what’s in your bank account and where you buy. If you can combine the two, you end up with mega-data,” said Fourie.

“Then there are the mobile companies that know who you talk to, how long you talk, and what you do. If you combine all this…”

Capitec launched its MVNO in 2022. It runs on top of Cell C’s enablement platform, with infrastructure provided by MTN.

Dubbed Capitec Connect, the bank marketed the service on the promise of “data that never expires”.

In reality, Capitec Connect simply offered a highly attractive out-of-bundle data tariff of 4.5 cents per megabyte.

Instead of buying data bundles, customers purchased airtime that never expires, which was then depleted as they consumed data.

Its price compared well against the lower-end data bundles of established players. However, Capitec’s prices started becoming uncompetitive for anyone consuming more than 1GB per month.

Regardless, Capitec’s strategy proved successful, and it signed up thousands of customers in its first few months.

A year later, Capitec launched a suite of data bundles — which expire — to close the gap in its product offering on the higher end.

By 31 August 2024, the bank reported that Capitec Connect had reached 1.2 million SIMs, of which 50% generated revenue within the past 30 days.

Capitec Connect had also contributed R69 million in net income in six months between March and August 2024, up from R4 million the year before.

Capitec also revealed data consumption figures, with usage reaching 5.1 petabytes in the half-year ended August 2024.

This is up from 1.4 petabytes in the same period the year prior.

In addition to the customer behaviour data, Fourie told Strydom there was a greater motivation behind entering the telecommunications market.

The boundaries between industries was blurring.

Vodacom now sells insurance policies and extends credit in the form of airtime advances, Old Mutual is moving into banking, and Shoprite has launched money market services.

Fourie not only regards Absa, Standard, FNB, Nedbank, and Investec as formidable competitors, he is very concerned about Big Tech entering the payments market.

“I am much more worried about the Apple Pays, Samsung Pays, WhatsApps… You know everyone is on WhatsApp, so just put a bank behind WhatsApp,” he said.

He believes that it will be a battle for data to enable service providers to sell the right products to their clients at the right price as value-added services (VAS).

VAS includes selling airtime, prepaid electricity, and lottery tickets as well as providing services like paying bills and renewing driving licences.

These types of services already earned the bank R2.7 billion in profit during its previous financial year and, according to Strydom, is the next area of growth Fourie is targeting.