| November 12, 2018
Banking is a tough industry for new entrants. People value the availability and trust promised by big, incumbent banks and may not wish to hand their money over to an unknown. And yet, Capitec, now the largest, if not yet the most valuable bank in South Africa, managed to gain a foothold and grow. Capitec’s story highlights the power of disruption.
From the start Capitec focused on appealing to the under-served: people with lower incomes who did not currently have a bank account. In 2001 this represented roughly one in three of the South African population. A huge potential market mostly ignored by the incumbent banks. The company’s Global One Account was designed to appeal to its target audience offering a debit card with low transaction fees, interest on account balances and low rate loans. The new offer was backed up by a centralised technology platform that freed up branch staff to focus on customer needs and quickly process opening new accounts, transactions, withdrawals, and deposits.
Inherent to the Capitec’s success was the removal of barriers to use. Given that many of the people the bank was aiming to serve could not write, Capitec introduced the use of fingerprints instead of signatures to validate transactions. Branches are situated in close proximity to travel hubs making access easy for the thousands of people using public transport to get to and from work. In 2011, Capitec introduced Sunday banking on the grounds that if you can shop on Sunday you should be able to bank on Sunday too. And in 2014, the bank introduced its remote app that worked on the cheaper, feature phones used by the vast majority of its customers.
Since the beginning Capitec’s brand promise has been one of equality, simplicity, and transparency. In 2007 Capitec launched its first broadcast ad campaign. Capitec’s straight-speaking and simple messages resonated with its target audience, and contrasted with the complexity and opaqueness of typical bank advertising. As the number of branches expanded, so too did the number of customers. By 2017 Capitec had over eight million customers.
As with all growing brands, the challenge for Capitec is how to keep up its growth momentum. BrandZ finds that Capitec is a Specialist, perceived to be very different, meaningful to many but less salient than the average. To grow, the brand needs to reach out and make its difference salient and meaningful to new customers. The obvious move is to extend the bank’s appeal to higher income customers. The company’s last annual report shows the bank claims a 25 percent share of customers earning less than 10,000 Rand a year but only 2 percent among those earning over 30,000 Rand. The challenge, however, will be to extend the brand’s appeal without undermining the clarity of what the brand stands for among its existing target market.
The Capitec story is a classic one of disruption, finding success by doing something different from the norm. By tailoring its offer to an under-served group of customers and ensuring widespread mental and physical availability, the brand has grown quickly. However, the biggest challenge may be yet to come. Can the brand continue to grow without changing what has made it so successful to date? But what do you think? Please share your thoughts.