/ 1 October 2021

Covid-19 accelerates Capitec’s move to digital banking

Sa Banks
(Photo by Sipho Maluka/Sunday Sun/Gallo Images/Getty Images)

The Covid-19 pandemic has speeded up digitalisation in the banking sector faster than might have otherwise happened. 

Capitec Bank, which posted its earnings on Thursday, reported that the number of clients using digital channels had increased by 22% to 8.9 million over six months to end August 2021. 

In an interview with the Mail & Guardian, Capitec chief executive Gerrie Fourie said there had been a material move to digital from May 2020 as the bank grappled with strict  lockdown regulations in response to the pandemic, but a move from cash to card transactions had already started in 2016-17.

“It has been an uphill battle. We have really started moving people from cash to card and from branch to digital. I think we have been very successful in it and I think Covid-19 has helped,” Fourie said.

“What is interesting is every time we have taken people to the app it just gives us more time in the branches to sell better and spend quality time with our clients. We see branches as a critical part of our business.”

The Financial Times recently reported that Virgin Money in the United Kingdom is to close almost a fifth of its 162 branches and thousands of bank branches have closed as Covid-19 accelerates the shift to digital banking.

Fourie said Capitec did not have similar plans for such a large move from physical branches. 

“In the last three years we’ve closed about 10 branches and it was more of a retail move. When we’re closing branches it is not about digital, it is about whether it is [the branch] making sense,” he said.

A number of South African banks have closed branches since the onset of the pandemic, including Absa, which has shut 13 branches or kiosks, Nedbank (48), and TymeBank (28), according to technology publication Mybroadband

In its results, Capitec reported a 15% increase to 16.8-million in the number of its active clients in the six months ended August. Fourie said the challenge now was “how do we optimise that client [base] so that their salary comes in with us”.

“Currently we have six million people with salaries paid into our bank account. Those are the people that really make a difference,” he said. 

A recent banks analysis report by audit firm PwC said South Africa’s Big Four banks — Absa, FirstRand, Nedbank and Standard Bank — were counting on digital innovations to keep them relevant to customers in the face of rising competition from new entrants in the financial sector, as well as mobile phone network operators and retailers.

For example, TymeBank, which does not have physical branches, has partnered with grocery retailer Pick n Pay to host  a national network of self-service kiosks in its outlets.

Asked if Capitec had similar plans, Fourie said: “For me, it’s about who understands their clients the best and who will deliver on their client needs. Tyme has partnered with Pick n Pay but it’s only because their kiosk is there and they do the SmartShopper [loyalty programme] through them.”

He said Capitec preferred an organic type of growth. “We don’t have an acquisition team that goes out there trying to acquire companies. The focus is growing organically and if there is opportunity then we will evaluate it. If it makes sense to us.”

Former African Bank boss Basani Maluleke has recently moved to Capitec. 

“I think she’s an excellent individual with very strong skills. South Africa’s got a skills shortage so we see it as an opportunity to bring her skills into the Capitec organisation and the move will form part of succession planning,” Fourie said.

“If we see somebody smart out in the market and we believe there is an opportunity we appoint those people, because we’re still growing. We’re looking to appoint 300 people in the next couple of months. It’s just part of the whole process.” 

Anathi Madubela is an Adamela Trust business reporter at the Mail & Guardian.