The bank has faced some fierce competition of late.
Capitec Bank chief executive Gerrie Fourie is unfazed by the wave of fierce digital banking competition that is placing pressure on the country’s banking industry.
Fourie told shareholders at the company’s annual general meeting held in Franschhoek that the lender was continuously being quizzed about the onslaught of new digital players.
“We believe you need to bring together a digital offer, a branch offer and the ability to communicate with the clients. These are the three areas we are working to cater to the needs of our customers,” Fourie said.
The microlender, which has previously announced it added 127 000 new customers a month, boasts 840 branches and 11.4 million clients, including more than 5.2 million clients who use digital channels to access their money.
However, the bank has faced fierce competition from lenders like African Bank, which launched its zero monthly fee banking account, who are giving customers access to up to six accounts with no monthly account fees.
TymeBank, Bank Zero and Discovery Bank have also offered competitive banking fees and interest rates.
Fourie said the new entrants were only doing digital banking. He said Capitec’s monthly cost of maintaining ATMs was more than R100 million.
“There is a perception, especially overseas, of free banking, including free monthly fees, and free ATM withdrawals,” he said. “Banking is not for free when you need ATM infrastructure. Banking is all about trust, regulation and compliance.”
Capitec previously said that 44 percent of its income was driven by transactional banking, highlighting its aim to become a fully fledged bank.
Asief Mohamed, the chief investment officer at Aeon Investment Management, said transactional banking was getting more competitive for the lower end of the market, directly as a result of new bank licences that had been granted over the last couple of years.
Mohamed said big banks such as Capitec have been forced to reduce entry-level account fees and offer higher interest on bank balances, because of the competition.
“Transaction fee income and higher interest rates on cash balances will impact Capitec Bank and other banks negatively,” Mohamed said. “However, the risk of a default of a new bank that is not yet sustainably profitable and well capitalised may deter customers from switching to the new banks.”
Capitec’s volume of banking app transactions increased by 75 percent to 343 million for the year to February 2019, compared to 196 million in 2018. The lender also covers the cost of the data when its clients make use of the app. In March it cut monthly internet banking costs to R1 from R1.60, while the monthly Global One account fee was reduced to R5 from R5.80. It also claims to lead the industry by having reduced the real-time payment fees to the other banks from R10 to R8.
Fourie said that the bank’s 11.4 million customers earned an average monthly income of R1 600. Fourie said that the company played a role in facilitating payment from customers in towns and cities to their families in rural areas. “Only 6 percent of our customers are people earning R20 000 or more, and that is still one of our concerns. How do we penetrate higher income earners?” Fourie said.