Details accompanying the Capitec results released today shows the one-time challenger to what used to be SAâs âBig Fiveâ now banks over half South Africans aged between 20 and 60. And with yet another set of breakout earnings in the half year to end August, Capitec continues vigorous expansion at a time its rivals complain about sluggish economic growth. CEO Gerrie Fourie shares some secrets of the Capitec success with BizNews editor Alec Hogg.
Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.
Watch here
Listen here
Edited transcript of the interview ___STEADY_PAYWALL___
Alec Hogg (00:06.808):
We’re in an age where trading statements are often issued, so there’s not much surprise when financial results are released by companies listed on the Johannesburg Stock Exchange. But today, the Capitec share price was up 4%. What does that mean? Well, it means the value of the company increased by 13 billion Rand. Quite extraordinary. Not that long ago, Capitec in total was only worth 13 billion Rand. Today, we’re talkingâŚ
Alec Hogg (00:40.856):
It’s extraordinary how far you’ve come, Gerrie. I can’t remember how long ago it was, but it wasn’t that long ago that Capitec as a whole was worth what you added in value to shareholder wealth today, thanks to these very strong financial results. And you’ve been there for the entire journey.
Gerrie Fourie (01:01.213):
Yeah, just to summarize quickly, when we listed, we had about 110 million shares. I think we closed at 80 cents, so that gave us around 80 million Rand. I donât remember when we hit the 13 billion mark, but whatâs incredible is that in August of last year, we were just over 1,500 Rand per share. So yes, we’ve had a very good run. But I always say, we never focus on the share price; we focus on the client and the business. The share price will take care of itself.
Alec Hogg (01:39.308):
And it certainly has. In your results today, you mention that what started as a retail bank has now evolved into a financial services group. Itâs interesting to see the different parts of the group and the contributions from insuranceâespecially funeral insuranceâand the business bank. We can talk about that later. But one area you’re absent in is investments. Any plans there?
Gerrie Fourie (02:13.223):
Yes, there are quite a few plans. The challenge is that we haven’t had enough time to focus on it yet. The one area weâve neglected, but is definitely on the cards for next year, is stockvels because thereâs a big opportunity in South Africa. Investments will follow right after stockvels. It’s on the roadmap, but other things have taken priority.
Alec Hogg (02:38.838):
Whatâs interesting is that when you started Capitec, there was an executive in South Africa, Piet Badenhorst, who put together what is now ABSA from his United Building Society. His philosophy was always price, price, priceâbecoming the lowest-cost producer. Since his departure, it seems the traditional banks have forgotten about that. But that remains a core part of your strategy, especially in how you’re entering the business market.
Gerrie Fourie (03:10.013):
Yes, I think one thing people donât always understand is that with 23 million clients, you get economies of scale. When you look at your OPEX and fixed costs, the difference between 12 million and 23 million clients is significant. Your fixed costs essentially halve. We understand that gameâbringing in large numbers, managing throughput and lower costs, and most importantly, passing those savings on to our client base. Weâve done this in the retail space and throughout the business.
Thatâs why weâve reduced business banking prices to the same level as retail. We believe all clients should be treated equally. If a transaction costs us 60 or 70 cents, we shouldnât charge one client 1 Rand and another 5 Rand. We should charge them all the same. Why should a business banking transaction cost more than a retail one? And why should higher-income individuals pay different prices than lower-income ones? So, we look at what a transaction costs, add a margin that aligns with our 25% ROE, and treat all clients equally. Price is important to us. We always ask, “Are we 20%, 30%, or 40% cheaper than the market?” Then we drive scale because with scale comes efficiency.
Alec Hogg (04:58.072):
The number of new business banking clients you gained in these six months is impressive. Headline earnings are up 36% for the six months ending in August. Your client base increased by 21%, and 12.5 million of your clients are now banking via your app, showing that your digital strategy is working. You added 69,000 new business banking clients during this period, a significant uptick from the same time last year. What kind of businesses are embracing the Capitec story?
Gerrie Fourie (05:44.273):
Whatâs important is that we havenât even advertised it yet. Weâve been focusing on building the business, and we had a lot of system instability in March, April, and May. Itâs only now that weâre really pushing it. Most of the clients coming in are through word of mouthâprimarily smaller businesses like sole proprietors and companies with just one, two, or three directors. Of the clients we onboard, we find about 40% are inactive, which is similar to what other banks experience in business banking. In the retail space, we see much more activity. So, the challenge is driving quality and product uptake.
Thatâs also why weâve revamped our merchant services strategy and acquiring strategy. Weâve cut point-of-sale machine prices by half and introduced transparent pricing for commission rates. In the past, pricing was inconsistentâone provider would undercut the next. Now, weâve made pricing competitive, transparent, and affordable, especially for SMEs and emerging markets.
Alec Hogg (07:19.464):
As a journalist, Iâm in a unique position, having started my second company now, so I understand just how important bank charges areâthey come straight out of my pocket. I used to bank with Mercantile, which is now Capitec, but had to leave because their systems were awful, even though their service was great. I recently met a couple of your team members at our business investment conference. They told me theyâre so busy opening new business accounts. Is that true? Are you getting inundated with business people wanting to cut bank charges and switch to Capitec?
Gerrie Fourie (08:12.925):
Yes, weâre seeing a big uptake. Weâre now opening about 1,000 business accounts per day. To give you an example, in merchant services, we used to sign up around 700 merchants a month. Now, weâre doing 500 per day, mostly with clients who already bank with us. The momentum is growing. Weâre also starting a major above-the-line campaign in January next year because weâre confident in our systems, though we still have small hiccups to handle the volumes. But now, if you go into the Capitec app, you can easily swipe left or right and manage your business banking.
Alec Hogg (09:09.72):
Itâs a little like what you did with retail bankingâstarting with one service and then selling additional products to your existing clients. Where did this whole idea come from?
Gerrie Fourie (09:28.333):
It happened organically, Iâd say. When we started the bank, about 50-60% of South Africans were unbanked. We had to compete against the five traditional banks, which was difficult. We couldnât take them on head-on in the cities or urban areas, so we started in rural areas. I remember being in the Transkei and thinking it was perfect because there was only one bankâMeeg Bankâand trust in banks was very low. No other banks were there, so we started there. We also didnât have the money for advertising, so word of mouth was critical for us.
If you provide excellent service, people will talk about it. Word of mouth is like how you choose a dentist or a doctorâitâs based on recommendations. So, we’re very focused on providing top-notch service because a happy client will tell 10, 15, or 20 other people. Thatâs a key part of our brand strategy.
Alec Hogg (10:45.368):
With the pricing of additional products, like managing your mobile phone account through Capitec, was that a deliberate move to expand your client base?
Gerrie Fourie (11:01.309):
Yes, in the retail space, it definitely was. Weâre seeing great traction with our Connect clients and value-added services. We have 23 million clients, so it’s just a matter of getting new products to them. This morning, I mentioned that weâre moving toward a single-service model because currently, business and retail banking are still on separate systems. Over the next two years, weâre going to integrate them into one system with one product range, so whatever we design will work for both business and retail clients. This will help us serve clients better, especially small business owners who are often sole proprietors.
Alec Hogg (12:04.898):
But doesnât that put a cap on the size of businesses you can bring in?
Gerrie Fourie (12:08.987):
Not really. For example, in emerging markets like Tembisa, Soweto, and Khayelitsha, weâre already operating through our retail branches because the majority of the small businesses there are sole proprietors. They have access to our full retail product range. We also sell our merchant services through our retail network. More complex businesses are served through the business bank, but eventually, weâll bring everything
together into one offering.
Alec Hogg (12:44.168):
Iâd like to revisit your incredible digital transformation journeyâ12.5 million people now using your app. Could you expand on that?
Gerrie Fourie (13:05.019):
Yes, itâs a major focus for us. The more people use the app, the fewer they need to visit our branches. Today, 98% of all retail transactions are done through the app or our digital channels. Weâve put a lot of work into making the app simple and user-friendly. We also have a very active digital team thatâs constantly innovating and improving the user experience. Weâre also launching new features regularly based on client feedback.
Alec Hogg (13:36.811):
You mentioned feedback, Gerrie. How do you gather that from your clients, and what are some examples of feedback that have influenced your app’s evolution?
Gerrie Fourie (13:48.029):
We use multiple channels for feedbackâeverything from social media to direct surveys and our call center. But whatâs key is the client journey and understanding their behavior. For example, if a lot of clients drop off at a particular point in the app, we investigate why. Then we either tweak the interface or improve the flow to make it easier. Our digital development team works closely with our client service team to address these pain points. A recent example is our app-to-app payment functionality. Clients wanted an easy way to send money without needing a bank account number, so we made it possible to send money using just a cellphone number.
Alec Hogg (14:38.257):
Thatâs a big advantage. It’s more like fintech companies than traditional banks. Do you think Capitecâs success is partially because of this fintech-like approach?
Gerrie Fourie (14:50.072):
Yes, in a way. Weâve always focused on simplicity and putting the client first, which is a hallmark of fintechs. Traditional banks tend to overcomplicate things with legacy systems and bureaucracy. Weâve avoided that by being agile and tech-driven. In fact, I often say that weâre more of a technology company that happens to have a banking license. That mindset allows us to move fast, iterate quickly, and meet client expectations.
Alec Hogg (15:23.418):
Do you feel like this is the future of banking, with more traditional players needing to adopt a tech-first approach, or do you think Capitec is in a unique position to lead this transformation?
Gerrie Fourie (15:37.106):
I think it’s inevitable for all banks. The future is digital, and client expectations are evolving rapidly. People want things to be simple, fast, and affordable. Traditional banks are trying to catch up, but it’s hard when you’re dealing with outdated systems. Weâve had the advantage of starting fresh without legacy baggage. But for all banks, the focus will need to shift more toward technology, data, and client experience.
Alec Hogg (16:05.887):
What are the biggest challenges you face in maintaining that tech-first approach as you scale?
Gerrie Fourie (16:13.039):
One of the biggest challenges is keeping things simple as we grow. When you get bigger, thereâs a natural tendency to add more products, features, and complexity. So, we constantly ask ourselves, “How do we keep the user experience simple and intuitive?” Another challenge is the speed of technology itselfâthings are changing so fast that you need to constantly invest in infrastructure and skills to stay ahead. Lastly, cybersecurity is always a top concern. The more digital you become, the more vigilant you need to be about protecting your clientsâ data and ensuring the highest level of security.
Alec Hogg (16:53.879):
Speaking of scaling, Capitec is also moving into more financial services, like insurance. How are you balancing that expansion with maintaining your core banking business?
Gerrie Fourie (17:06.319):
We see these new services as complementary to our core offering. When we launched Capitec, we were primarily a bank, but over time, weâve added products like insurance and credit. These services allow us to meet more of our clients’ financial needs in one place, which creates loyalty and deepens relationships. The key is to integrate everything seamlessly. So whether you’re banking, taking out insurance, or using our credit products, it should all feel like a unified experience. We also make sure these additional services align with our core values of simplicity, affordability, and transparency.
Alec Hogg (17:48.924):
Youâve mentioned that your insurance productâspecifically funeral insuranceâhas been quite successful. Whatâs driving that growth, and how do you see the insurance side evolving?
Gerrie Fourie (18:00.607):
Funeral insurance has been very successful because it’s a product thatâs deeply important to many South Africans. Thereâs a strong cultural element to it, so when we launched, we focused on understanding what people wantedâsimplicity, affordability, and transparency. We designed a product thatâs easy to understand, with no hidden fees, and it’s been very well received. As for the future, weâre looking to expand into other types of insurance, like life and health insurance. Again, itâs all about meeting our clientsâ needs in a way thatâs consistent with our brand.
Alec Hogg (18:39.972):
It seems like you’re not just offering more services; youâre creating an ecosystem. Is that intentional?
Gerrie Fourie (18:48.027):
Absolutely. Our goal is to be the go-to financial services provider for our clients. Whether it’s banking, insurance, or credit, we want them to feel like Capitec is their trusted partner for all things financial. By creating an ecosystem, we can provide more value to our clients and build deeper relationships. But again, it all comes down to making the experience as simple and seamless as possible.
Alec Hogg (19:16.705):
Itâs been an amazing journey for Capitec, and it sounds like you have an exciting roadmap ahead. As we wrap up, whatâs your vision for the next five to ten years?
Gerrie Fourie (19:28.652):
Our vision is to keep growing, both in terms of clients and products. We want to become the leading financial services provider in South Africa and potentially expand into other markets. But growth isnât just about numbers; itâs about making a meaningful impact on people’s lives. We want to continue focusing on innovation, client experience, and staying ahead in the digital space. Ultimately, weâre here to serve our clients, and if we keep doing that well, the growth will follow.
Alec Hogg (19:58.278):
Gerrie, itâs always a pleasure speaking with you. Congratulations on the strong results and all the success you’ve had so far. I look forward to seeing where Capitec goes next.
Gerrie Fourie (20:09.355):
Thanks, Alec. Itâs been great chatting, and I appreciate the opportunity.
Read also:
