By Larry Claasen
After transforming retail banking in South Africa, Capitec is now expanding into business banking with a focus on affordable services for SMEs.
CAPITEC aims to replicate the success that has seen it become the country’s leading retail bank in its new business banking offering.
Capitec was founded as a microlender in the Cape Winelands in 2001 and has grown its customer base to 22-million active customers, making it the largest bank in South Africa, when measured by number of customers.
Capitec’s formula of offering a low-cost transactional banking service has seen it become a serious challenger to the “big four” banks: ABSA, Standard Bank, Nedbank and FNB.
This strategy not only saw it become a significant player in the South African banking sector, but it was also a major reason why 85% of people in the country now have bank or mobile money accounts.
Capitec Business Banking disrupts traditional banks
Now, Capitec is now applying the same formula when it comes to business banking by offering lower-cost products to SMEs and also sees it offering services to informal businesses.
A key part of this strategy was the acquisition of Mercantile Bank in 2019, which was subsequently rebranded as Capitec Business in 2024. This rebranding saw it introduce a new app and new online banking service, and the ability to open an account online in minutes with no paperwork.
“We introduced scored business overdrafts and business, property and asset finance that is approved within days,” said Capitec in its results for the year to end February.
It said its strategy for business banking was to use the best technology and to leverage its data. The initial focus was on implementing stable and secure new systems and platforms.
Its service model consists of a relationship suite and 19 business centres. Through the relationship suite, virtual consulting is possible and its clients have a relationship banker available anytime through a call, online or on its app.
Capitec Business Banking leverages tech for SME growth
It is in the process of building an enterprise payment system that will allow businesses to accept card payments, online payments and receive and make bulk payments. For this reason, the Capitec Pay system has also become part of business banking.
Outgoing Capitec CEO Gerrie Fourie has a clear idea of the type of customer the group wants to provide services to. Speaking at its results presentation, he said they were looking at businesses that were generating turnover of between R5-million to R100-million a year.
How Capitec Business Banking targets SMEs and informal markets
Capitec was looking to target businesses that were too small to fit into a typical corporate banking framework, in particular, and were consequently being underserved by the market, said asset management group, Ninety One, in a research note in December 2024.
But this was just the beginning. Ninety One noted that Capitec was only at the start of its move into business banking, which could eventually see it develop novel alternative approaches to business financing.
Capitec Business Banking unlocks cashflow-based lending
“Capitec is in the process of acquiring business clients while gaining a better understanding of their transactional activities and cashflows. This will allow the bank to unlock an alternative approach to business financing, effectively lending funds against the cashflows of a business rather than its assets.”
Such a move could be a game-changer for many businesses, as they might not have the assets to act as security for a loan, but have demonstrated that they have the cashflows to pay off their debt.
One way that Capitec can better understand the cashflows of its business clients is by monitoring the transactions coming through their Point-Of-Sale (POS) machines.
The group signed up almost 40 000 new merchants during a promotion in 2024, which resulted in volumes on POS machines increasing by 28% in both volume and value of transactions to R64,2-billion for the year.
Fourie says having affordable POS machines is key to fostering economic growth in South Africa, especially when it comes to servicing the informal economy.
“I really believe that to get into that informal market, you need to make the whole payment mechanism much cheaper. The Point-Of-Sale machines are too expensive. You can’t have that person paying interchange and renting at R380 a month.”
Though Capitec is committed to developing its business banking operation, it plans to do it in a methodical way.
Fourie says the group will take about two years to work on its new offering, as it wants to have the capacity to cope with high demand for
its offering.
“If you put the Capitec brand on it, you need it to be able to handle volumes, and we need to be able to create the capability to handle those volumes.”
