South Africa’s leading banker Capitec Bank is increasingly positioning itself as more than just a traditional lender as a surge in non-interest income signals a deeper shift towards a platform-style business model.
The bank released a stellar financial report on Wednesday maintaining its position as South Africa’s largest bank by market value, with a market capitalisation of R511-billion and a client base of 26-million.
Value-added services drive growth
Value-added services and Capitec Connect are the drivers of the 23% growth in headline earnings, contributing 26% share of group earnings. The VAS platform, which offers digital purchases of airtime, electricity and bill payments boasts 12-million monthly users while Capitec Conneect has over 1-million active users.
Graham Lee, Capitec CEO, he explained that this showed the bank’s intention to extend beyond core banking services, tapping into customers’ broader financial and digital needs.
Speaking on whether Capitec remains a traditional bank or is evolving into a broader business, Lee explained that they remain focused on the core systems and discipline needed to serve customers well.
Moving beyond banking
He said understanding their clients and using both their own data and customer data effectively are important in remaining a strong bank and they will continue to keep banking at the centre of what they do.
“However, in addition to that, we also move beyond banking because those strengths are useful in other areas as well and our clients need us to bring the Capitec fundamentals to other elements of their daily financial lives.
“Connectivity is so important for them because for connection with others and for their access to banking and financial services. I think that the best way to see us is a platform and a business that is also beyond banking but remains a bank at heart,” said Lee.
Shared value approach
As new entrants are infiltrating the market, Lee said the bank is leaning into a shared value approach by returning part of its scale benefits directly to customers. He said competition for its core market is not a threat but validation of the segment it dominates.
The bank said reported that it helped clients save a total of R1-billion for the year. This included R228-million from simpler and lower fees, R213-million from reduced card machine costs and commission, and R61-million from cutting international card fees and foreign exchange margins.
Additional savings came from its Capitec Connect offering, with R330-million saved through lower data prices, R108-million from data and rewards benefits, and R107-million returned to clients through 1% cashback on credit card spending
“Our aim is continuing to protect and grow our core business. Our approach is a simple one which is that we continue to find ways that can create more value for our clients and particularly where we operate.
“We look to how we use our scales and the economies of that scale to create value for our clients and give back to them, we can see that reflective in our results in the R1-billion that was given back to our clients in accumulation of lower fees, data rewards and cashback, and we will continue to do that,” said Lee.
Best customer experience
He said they have highlighted focus on making the bank as secure as possible while also delivering the best customer experience where it matters most.
He explained that combining strong security with better service helps create more value for clients, allowing the bank to share its success through improved experiences, added benefits, and a clear strategy to protect its personal banking market share.
Lee also downplayed the concerns around recent share sales by long-time shareholder Tshepo Mahloele, co-founder and chairman of Harith General Partners, saying this was a routine portfolio management than signal of concern.
He said Mahloele has been a highly valued shareholder for many years and has made significant investment with the bank, which he emphasised to have benefitted all parties.
Lee said it was understandable that investors sometimes adjust their portfolios and did not intent to mean that there is an expected shock.
“He remains a very significant shareholder and I don’t expect there to be a shock coming. In actual fact, these transactions are taking place over the time they already bagged in what you see on the market,” said Lee.
- Capitec Bank is shifting from traditional lending towards a platform-style business model, with non-interest income and value-added services (VAS) driving a 23% growth in headline earnings.
- The VAS platform has 12 million monthly users offering digital purchases (airtime, electricity, bill payments), and Capitec Connect has over 1 million active users, reflecting expanded digital financial services.
- CEO Graham Lee emphasized maintaining banking fundamentals while evolving beyond traditional banking to meet broader customer financial and digital needs through data-driven service.
- The bank adopts a shared value approach, having returned R1 billion to clients through lower fees, cashback, data rewards, and other savings, leveraging economies of scale to benefit customers.
- Capitec focuses on strong security combined with excellent customer experience to protect its market share, dismissing concerns over shareholder Tshepo Mahloele’s recent share sales as routine portfolio management.
