Capitec strategy to achievement essay

Paper type: Financial,

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History shows that the South African banking sector has predominately focused on midsection to prestige income groupings in the market, while neglecting the needs and demands of low profits groups (Manson, 2012). Capitec Bank however, focused on the needs of those low profits groups, creating a business model that was especially tailored to the requirements. Capitec was introduced in the banking market during a time of crisis, Saambou Bank, which focused in micro loaning had collapsed (McNulty, 2009).

However Capitec has was able to endure this kind of predicament and since its inception, has surfaced as a pressure to be believed with, within a relatively short time of time. The bank has managed to penetrate the South African banking sector with advancement in a matter of a couple of years due to its rendering of the imaginative Bottom with the Pyramid (BoP) strategy geared towards targeting the low end consumers (van Themaat et ing, 2013). It is therefore essential to measure the BoP strategy, along effortlessly its aspects.

That is why, this dissertation will analyze the history of Capitec Financial institution and in particular format the good adaption in the BoP approach as well as it is growth and current location in the bank sector. Nevertheless , the main objective that will be mentioned in detail will probably be on the areas of Capitec’s strategy crucial to get leverage in its position in the South Photography equipment banking sector.


Capitec Traditional bank was founded on the 1st of March 2001 and created back on its micro credit organization, keeping in mind their intention to ascertain a proper bank in the microfinancing platform (Manson, 2012). Microfinance is a expression used to describe the provision of financial services moreover to microcredit to small companies and the underlying part of the pyramid (BoP) population (van Themaat et ing, 2013). In the beginning, Capitec began as a 300-branch micro-loan business with the only product being 30 day loans with a thirty percent monthly fascination. Imperatively, this business of micro-loans recognized the proper aim and complementary cost of building out an underlying foundationnecessary for a transactional bank (Ashton, 2012). Depending on statistics it can be found that BoP is far more than 2/3 of the populace that survive on bare minimum income (van Themaat ainsi que al, 2013). Furthermore Finscope 2003 predicted that thirty five percent from the total human population in SA have never banked or employed any economical service to take care of their finances. With relation to the above, it truly is recognized that other finance institutions overlook portion the BoP as they are regarded as non-profitable (Coetzee, 2003). However on the other hand, Capitec recognised this market as a occasion as virtually all this population remained unbanked due to the various constraints that prevented them from obtaining financial services (van Themaat ainsi que al, 2013, Robin et al, 2005). The bank implemented its profit-driven strategy simply by customising its services and products for the needs of the BoP to realise the following: Acceptability, Availability, Cost and Consciousness, thereby conquering the restrictions that existed. (Coetzee, 2003, van Themaat et approach, 2013, Robin et al, 2005) This approach deemed powerful which has triggered an increase of market share with 51. 3 percent compound interest during the last five years which is in line with its aim of being a profit-driven microfinancing institution (van Themaat ainsi que al, 2013). These factors used by Capitec Bank to penetrate the banking sector will be mentioned in this daily news.


As mentioned previously in the record, Capitec overrode many restrictions that had previously still left the BoP sector unbanked. The creators of Capitec critically examined the BoP and found that many are self conscious because of their lack of education, expertise, literacy, cannot afford fundamental financial services and this their awareness of bank is that it is complicated, costly, difficult and time consuming (van Themaat et al, 2013). Capitec provides a basic and appropriate approach to banking which has improved these perceptions taking into consideration that the Bop are first time users. Capitec Bank (2014) displays Capitec’s item offering a Global One account that incorporates a savings, deposits and a credit center which makes for simpler banking offering excellent utility and value.

Capitec’s interaction with clients happen to be face-to-face, paper-less, cash-less and card-based (Haladjian, 2006). Beating the lack of self-confidence and literacy skills in first time BoP clients was achieved by paperless IT and management info system (van Themaat ainsi que al, 2013). This also incorporated biometric identification using fingerprint technology and digital cameras to identify their very own clients which creates ease of use and quicker response time (van Themaat et ing, 2013). Defeating the language obstacle was achieved by employing personnel from the regional communities. (Robin et al, 2005). Capitec’s investment into human resource schooling has made intended for efficient interaction with clientele strengthening customer-to-bank relations through eliminating a bulletproof cup barricade, customers receive a personal service and they are treated notably, which makes transacting a more approachable service. (Coetzee, 2003) Simply by treating buyers with esteem, this boosts the emotional charm to the BoP population. As compared with service within a big several branch, the Bop buyer is remedied as inferior and unvalued, therefore Capitec defines this focus simply by customer and not by profits (van Themaat et ing, 2013).

The consumer interface systems at ATM’s have been modified to the requires and preferences of the BoP catering intended for illiterate customers. (Coetzee, 2003) The supervision IT method is centrally manipulated, increases convenience and consumer value by reducing administration costs, paper work, prevents fraud and keeps track of ventures using finger-print biometrics. (Coetzee, 2003, vehicle Themaat ainsi que al, 2013) It also provides an impressive safer environment as money is certainly not kept in branches and withdrawals are obtainable at ATM’s and selected retail stores considering that various unbanked sectors exist in areas encountering high offense and this positively contributes to driving down financial assistance costs (Coetzee, 2003, Haladjian, 2006). Starting an account requires ten a few minutes. After credit rating evaluation and approval, the money application procedure is as follows: scan IDENTIFICATION document and verify using barcode, search within payslip, require a photo in the client, get other data, open bank account, print financial loan agreement, enable client to sign, in that case scan and return the original, create an ATM greeting card and give cards to the consumer (Coetzee, 2003).

Coetzee 2003 highlights that the previously unbanked population considered asundesirable and unprofitable will be being dished up by Capitec Bank in large quantities since its beginning. This further proves that the strategy of streamline its support implemented by Capitec interests the Bop population permitting Capitec to penetrate the banking sector.


Capitec makes their providers more available to customers by having longer business hours, raising the number of twigs, allowing withdrawals at stores, using ATM’s, internet banking and making an application for credit on the web. According to Planting (2006) Capitec Lender has extended their organization banking several hours. On weekdays branches are open coming from 8am to 5pm (Manson, 2012). The majority of the branches of the big four banks: Absa, Nedbank, FNB and Standard bank close around 3: 30pm or 4pm. Capitec considers that most consumers are working and will access branches after doing work hours which can be around 4pm. In some cases limbs are open up till after where that suits clients and branches are also capable of visiting the workplace of customers to offer all their services (Coetzee, 2003). About Saturdays twigs are available between 8am to 1pm and on Sundays branches in large buying centres are open between 10am to 2pm (Manson, 2012). A lot of the big 4 banks limbs close on Saturday at about 11am and Sunday most branches are generally not open. These times considers that customers will not be able to carry out their bank during the week because of very long and exhausting working several hours. They understand the needs of customers by offering longer business financial hours. Capitec knows that their customers need to reach their twigs easily. This really is done by reducing the size of limbs and raising the quantity of twigs (Manson, 2012).

They would rather have more limbs in one location than have one big branch. Many persons do not save because they just do not have access to financial services (Finscope, 2003). Raising the number of limbs increases ease of access and personal savings will be encouraged. Using this procedure makes their services attainable and easy for customers. In the beginning Capitec’s primary target emphasis was the BoP. Branches can be found at taxi ranks, teach stations and townships wherever their services are easily offered to the low cash flow group. They have expanded over time, making their very own services open to the various other income teams by finding branches near rural areas and in shopping malls. Capitec uses existinginfrastructure to enhance banking services accessibility. They have partnered with retail outlets including Checkers, Pick ‘n Pay out, Shoprite and Pep. Customers can pull away cash by these stores. Most of the suppliers allow funds to be taken when getting items in the stores apart from at Opt for ‘n Spend no buy is required to help to make a drawback. They have improved their network location simply by allowing withdrawals at suppliers without having to buy any huge infrastructure (Kim & Mauborgne, 2005). This permits easy access to money and convenience for customers. Capitec ATM’s are located around SA which makes them easily accessible.

In the event customers are unable to access a great ATM to withdraw cash, they can always go to stores making their very own services more accessible and unique compared to the main banks. The ATM’s can be used to check balances, withdraw cash and multi-loan, transfer cash to savings plans and change a pin. The availability of services proposed by Capitec is improved by joining up with Master card. Cards happen to be developed to permit customers utilization even in remote areas (Lee, 2010). Mobile bank is also utilized by Capitec; clients can use their cell phone to get into multi-loan, savings plans and savings account. You can use it to purchase airtime and electrical power, check accounts balances and former electricity bridal party purchased, take away multi-loan and make payments to customers who bank with Capitec, transfer funds between your accounts and register for SMS bring up to date for reliability purposes. Capitec offers internet banking that may be simple, secure and will save you the customer money.

Money can be managed when it matches the customer. Internet banking permits customers to transfer cash between all their accounts, generate stop instructions, check their very own statements, duty interest license, payment background register for TEXT MESSAGE update program. Customers 1st need to get their nearest branch to join up for mobile or net banking and to find out how functions. After enrollment customers can simply access their services in order to suits these people. They also enable customers to apply for credit on the net which increases availability of their particular services. A credit application should be completed online and they will contact the customer to go over it with them, producing credit application easily accessible. The use of EMP technology and cards linked to maestro permits customers utilization of their credit cards offline, offering services in areas of limited access such as rural neighborhoods (Haladjian, 2006). Using these strategiesCapitec has made their solutions more offered and easy for customers, therefore improving the banking sector. These tactics used include increased all their client base and resulted in the growth of traditional bank. Businesstech (2014) reveals that Capitec provides overtaken Nedbank and is today the fourth major bank with approximately 15. 8 % market share. Value

A substantial component behind Capitec Bank’s effective business model was its advancement a strategy targeted at understanding the requires of their customers which are the “bottom of the pyramid population (van Themaat ainsi que al, 2013). This prompted the bank to provide affordable banking products and services which were specifically designed in accordance to its customers’ needs. Capitec centred in having straightforward banking products and services and wanted to have the lowest fees, hence arguably so that it is the most cost-effective bank to bank with amongst many of its opponents in the banking sector (Manson, 2012). In order to understand this strategy, it is essential to highlight the banking product or service Capitec offered which allowed it to penetrate the banking sector in S. africa as well as making a comparative analysis with the products and services of some of the main banks in South Africa.

The essential factor of Capitec’s accomplishment is their Capitec’s Global One bank account which consists of three specific features: this allows a person to have the ability to transact, save and access credit, all with one account (Capitec Bank, 2014). The efficiency of this account ensures that clients do not have to available three independent accounts which usually cuts down on administrative costs. The monthly supervision cost intended for the Global One account including all the aspects by 01 Drive 2014 amounts to R5. 00 (Capitec Bank, 2014). Furthermore there is free entry to card, mobile as well as internet banking in addition to so performing makes it more desirable to Capitec’s target market (Manson, 2012). Comparing Capitec’s Global One account with that of its counterparts from the big four banks in the stand below, it could be seen that this account is more superior regarding its features and much more cheap than the competitor accounts of other banking companies.


Transactional Account

Family savings

Gain access to Credit

Capitec- “Global One Account




FNB- “Easy Account




Absa- “Flexi Account




Nedbank- “Ke Yona Account




Standard Bank- “PlusPlan Account




The Global One particular transaction feature allows you to transfer, deposit or perhaps withdraw money as well as to make purchases and repayments (Capitec Financial institution, 2014). The fees that Capitec charges relating to the transaction aspect on this consideration is by far the lowest priced in comparison to the deal accounts of the big four banks. Service fees relating to most card acquisitions are free whether you purchase for card equipment, shop online, purchase by telephone or through mail. Money transfers to possess accounts can also be free and other accounts is charged at fees of R1. 05. Harmony enquiries through all stations are also free. (Capitec Bank, 2014) The savings component on the Global One bank account allows an individual to have several different cost savings plan which has the ability to make interest starting from 4. 45 to 9% depending ontheir plans. These types of plans can even be flexible or perhaps fixed according to their preference. With flexible cost savings, people may earn coming from 4. 40% interest on the daily bills as well as choose the amount they want to deposit as well as the frequency with their deposits (Capitec, 2014). An additional to these programs is that there is no monthly admin fee that should be paid out to each consideration as well as zero minimum harmony required in order to start conserving.

Fixed-term savings gives 1 the ability to choose from two deposit options. The foremost is a “single deposit which can run by a period of 6 to 60 weeks with a bare minimum balance of R10 1000 and a maximum investment of R5 million (Capitec Bank, 2014). The second choice is “multiple deposits that may run coming from a period of 6 to 24 months which has a maximum purchase amount of R1 million. The interest rate is set for the entire term and interest received from this alternative can either end up being reinvested or perhaps transferred to returning to one’s purchase or savings account (Capitec Bank, 2014). Looking at the contending accounts of the other major banking institutions which can be noticed in the stand below, most offer interest rates that are lower than 1%. Capitec on the other hand gives highly competitive interest rates which make it more profitable for people to bank with them as they are able to earn more prove savings.

Financial institution

Capitec- “Global One Consideration

FNB- “Easy Accounts

Absa- “Flexi Consideration

Nedbank- “Ke Yona Account

Standard Bank- “PlusPlan Account

Interest Rates

5. 40 to 9%



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