Capitec’s digital banking boom: 21% increase in App clients drives record growth

by · BizNews

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Capitec Bank continues to reshape South Africa’s financial landscape, reporting an impressive 36% growth in headline earnings, reaching R6.4 billion for the six months ending 31 August 2024. Central to this growth is the rapid expansion of the bank’s digital client base, with active banking app users surging by 21% to 12.4 million, up from 10.3 million in August 2023. This milestone underscores Capitec’s success in leveraging digital transformation as a catalyst for growth.

Capitec CEO Gerrie Fourie says this performance marks the bank’s transformation from a traditional institution to a multi-faceted financial services provider. “Our results are a testament to the strength of our diversified business model. We’ve continued to invest significantly in digital solutions since 2020 despite economic challenges. This, combined with favourable political and economic conditions, has paved the way for continued growth.”

Digital banking surge: 12.4 Million clients

Capitec’s strategic focus on digital banking has proven to be a game-changer. The bank’s active app users now make up 54% of its total 23 million clients, further solidifying its position as South Africa’s leading digital bank. Transaction volumes via the app surged by 30%, with digital and card payments accounting for 89% of all transactions. “Millions of South Africans are embracing digital banking solutions that make life easier and financial services more accessible,” says Fourie. “Our app is driving convenience and affordability, transforming the way people manage their finances.”

This growth in digital banking usage is supported by Capitec’s ongoing investment in technology. The bank plans to invest an additional R174 million in technology and cloud services over the next six months, reinforcing its commitment to scaling digital offerings and enhancing client experiences.

Expanding value-added services and Capitec Connect

Capitec’s value-added services (VAS) also saw significant growth, with net income from VAS increasing by 73% to R2.0 billion. Services such as cash transfers, prepaid vouchers, and bill payments attracted 16% more clients, reaching a total of 10.7 million users. The sale of vouchers alone grew to 132 million transactions, highlighting the bank’s success in integrating everyday financial services into its ecosystem.

Capitec Connect, the bank’s mobile virtual network operator (MVNO), also made strides, increasing active SIM cards to 1.2 million by August 2024. Data usage spiked to over 5 million gigabytes, generating R69 million in net income compared to just R4 million the previous year. “Our focus on expanding Capitec Connect and other VAS offerings is creating a more seamless, digital-first banking experience,” says Fourie. “These services not only enhance our clients’ lives but provide us with critical data to further refine and personalise our offerings.”

Insurance growth and new life cover offering

Capitec’s insurance business continued its upward trajectory, contributing significantly to the bank’s overall earnings. Funeral insurance grew by 14% to R727 million, with a 20% increase in active policies, now covering 13.6 million lives. Additionally, Capitec launched a new life cover product in June 2024, which quickly gained traction with 38,526 active policies, contributing R8 million to the insurance segment.

“Our insurance products are designed to be transparent, affordable, and easy to access. This aligns with our mission of providing simple yet comprehensive financial solutions,” Fourie notes.

Business banking: A strategic pivot

While headline earnings for Capitec’s business banking arm decreased 12% to R214 million, this decline was part of a deliberate strategy to reduce fees and reposition its merchant services. The bank remains focused on long-term growth in this segment, with active business clients increasing by 30% and merchants by 31%.

“Our fee restructuring and e-commerce strategy adjustments are laying the foundation for future expansion in the SME market,” says Fourie. “We’re targeting growth in underserved sectors and ensuring our solutions are accessible to all businesses.”

International expansion: The AvaFin acquisition

Capitec’s international ambitions were boosted with the acquisition of AvaFin, an online consumer lender operating in multiple countries, including Poland, Spain, and Mexico. From May to August 2024, AvaFin contributed R66 million in profit, marking Capitec’s first foray into global markets,

“This acquisition opens up exciting opportunities for Capitec to reach new markets and expand our product offerings,” says Fourie. “It aligns with our 10-year vision of becoming a leading global financial brand.”

Enabling financial freedom for millions

Capitec’s strong financial performance enables the bank to pursue an ambitious vision of empowering millions of South Africans beyond traditional banking. “We’re investing not just in our own growth but in creating opportunities for our 23 million clients,” Fourie says. The bank has been particularly successful in the 36-60 age demographic, increasing its market share to 54.4% in this segment.

Capitec’s digital transformation has allowed it to offer services, from vehicle and education loans to international payment solutions, all within its user-friendly app. “We’re giving our clients the tools they need to improve their lives, whether through affordable data bundles, short-term savings solutions, or entertainment services like Showmax streaming vouchers,” concludes Fourie.

A digital future

With its continued investment in technology, product diversification, and client-centric solutions, Capitec is positioned for sustained growth. Its focus on digital banking, value-added services, and international expansion sets the stage for a future where it remains a leader in South Africa’s financial services sector.

“We’re not just growing a bank; we’re igniting growth and creating new opportunities for 23 million South Africans.” Says Fourie.

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