Capitec more scared of Apple than South Africa’s new digital banks

Capitec CEO Gerrie Fourie said he is far more concerned about the competition that international brands like Apple and Facebook could bring to South Africa’s banking sector than local market players.

South Africa will get a new bank in 2024. This is after Old Mutual recently received Section 17 approval to establish a bank.

Old Mutual’s bank is set to be launched before the end of 2024, following a two-year build-up. It will target the upper mass market and lower affluent consumers.

In a media briefing following the release of the company’s results, Old Mutual CEO Iain Williamson provided an update on the company’s plans to launch a bank.

The South African Reserve Bank’s Prudential Authority approved the company’s application for a banking licence in November 2022.

The group already has existing lending and transactional solutions — an unsecured lending product and the Old Mutual Money Account — with the latter handled through a partnership with Bidvest Bank.

Old Mutual said that the unsecured lending solution, in particular, is already a strong contributor to group profitability.

“Establishing a bank within the group will allow us to maintain a primary relationship with our customers, driving greater regular interaction with them and enhancing cross-sell opportunities across the group,” the insurer said.

“It will also enable the group to accept retail deposits, thereby providing a cheaper source of funding.”

The company’s annual report shed more light on which part of the market Old Mutual will be targeting with its bank in South Africa’s highly competitive financial sector.

It said building a bank is central to its plan to become a fully integrated financial services ecosystem and the primary touchpoint for its clients.

Old Mutual built the bank from scratch using cloud technology from 10x Banking, allowing it to deliver personalised, cost-effective and flexible solutions to its customers.

In particular, the insurer is targeting the upper mass market and lower affluent consumers — customers earning between R5,000 and R80,000 per month.

This has traditionally been Capitec’s stomping ground. It has done exceptionally well in this segment and has grown rapidly to serve over 20 million customers.

Fourie told Daily Investor he is not concerned about Old Mutual 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,” he said.

“They are now just getting their own banking license and their own banking system.”

“What that offer looks like we haven’t seen, but I don’t expect that it will materially change from what they’ve done in the past. So, let’s wait and see what comes out of the banking system.”

Fourie said Capitec has built quite a compelling offer over the past couple of years, and this can be seen in the bank’s results.

Capitec’s results for the financial year through 29 February 2024 revealed an almost 15% jump in profit for the year.

Fourie added other companies concern him more than Old Mutual. “I’m much more worried about your international players with strong brands than the South African players,” Fourie said.

“We always watch them, and we’re always careful, but the brand positioning of international players — I am watching that space more.

“But we are working the whole time to make sure our client needs are satisfied. And we’re delivering what the client wants.”

Fourie said many international players could disrupt South Africa’s banking space, and he identified Apple and Facebook as two potential competitors.

“Apple is an unbelievable, strong trade name. And if they come into South Africa with full banking, that’s a strong proposition,” he said.

However, he said that, ultimately, the player who understands the client’s needs the best and delivers on them will be the one who wins.

This article was first published by Daily Investor and is reproduced with permission.