Capitec Bank is a retail bank based in South Africa that was founded in 2001. It has quickly become one of the most innovative and fastest-growing banks in the country, with a focus on providing simple, affordable, and accessible banking products and services to individuals.
The bank started with a single branch in Stellenbosch, Western Cape and has since expanded to over 800 branches across South Africa, making it the third-largest bank in the country by customer numbers.
Capitec Bank offers a range of products and services, including savings accounts, personal loans, credit cards, and transactional accounts. The bank’s business model is built around offering low fees and competitive interest rates, with a focus on digital banking solutions that make banking easier and more convenient for customers.
One of the most significant factors that contributed to the bank’s success is its unique credit assessment model, which is based on a client’s behavior, rather than their credit history. This has made banking more accessible to many South Africans who were previously excluded from traditional banking services due to a lack of credit history or low credit scores.
Capitec Bank has received numerous awards for its innovative banking products and services, and it continues to grow in popularity and market share in South Africa.
PESTLE Analysis of Capitec Bank
The PESTLE analysis of Capitec Bank illustrates the industry environment in which it has been operating, highlighting the potential challenges and growth opportunities.
Political Factors
There have been positive changes in the political front of South Africa in the post apartheid era, but in 2021, many businesses experienced volatility due to the hostile conflict. Capitec business responded to this civil unrest trough adjustment of the cash flow. Moreover, in Gauteng and KwaZulu-Nata the company had to deal with cash losses and property damage.
The global geo-political disturbances such as volatility in Eastern European affect the investment output of the company (Capitec Bank, 2022). The investment decisions in other regions are also guided by the geo-political stability, as reoccurring volatility indicates underlying political conflict that can have detrimental effect on the organization’s profitability.
Government’s policies pertaining to banking sector is another major influencing factor for the company. For instance, the regulations related to insurance, taxation, interest rate define the banking policies adopted by the company. In addition, the lending process is in accordance to the government’s policies.
Economic Factors
The economic position of a country has a major effect on the banking industry as the financial decisions of the consumer are driven by country’s economic condition. The profitability of Capitec is largely dependent on the financial activity of the public. South Africa has been experiencing slow economic growth, and COVID further created economic complications.
The company has been able to maintain a profitable position amidst financial crunch. More than 20% annual growth was reported by the company while a positive trend was observed in earnings per share as well. However, the pandemic and resultant lockdown has adverse impact on the operating profit and headline per share (Zwane, 2020).
Post COVID has indicated the return of business activities to the pre lockdown levels, which has benefited the company. Capitec was able to substantially expand its market share by gaining new customers. Furthermore, the headline profitability illustrates the economic growth of the organization in the banking segment (Buthelezi, 2022).
Social Factors
The recent times have seen changing pattern of consumer banking preferences, as more people shift towards digital financial transactions. This increasing digital payment trend is a positive component for Capitec as it would further expand its digital banking business model. COVID has further supported the ease of buying through digital payment solutions.
The use of traditional banking card was lower during the lockdown as people were not able to go out of homes and make purchases, thus indicating downward trend in this domain. Therefore, lockdown has benefited the growth of digital transactions and internet banking. A recent trend observed is the increasing number of people displaying preference for app based payment (Discovery Bank, 2022).
The management has maintained a positive brand image during the COVID, as the customers were offered flexibility in regards to their payments and interested related payments. In addition, Capitec is known as an institution that caters to the banking needs of people from various socio-economic backgrounds. The focus on inclusion has helped in establishing positive image.
Technological Factors
Since Capitec Bank has digital presence, the company significantly relies on technology to carry out its business operations. An example is the option of scan to pay to facilitate the customers to use the app for making payments. People have shown a preference for simplified payment solutions and the company has used technology to keep relevant with the people’s digital needs.
Another way that technology has been used to manage business operations and facilitate the customer is the process of opening an account. Rather than following the traditional account opening process, the bank relies on digital medium. The remote on boarding offers the customer the ease of setting up an account while using their mobile phone (Capitec Bank, 2022).
The company is also using technology to strengthen its business operations. For instance, technology enables the management to identify the occurrence of financial fraud and address the issue diligently. Machine learning and other IT tools have enabled Capitec to capitalize on the benefits of technology.
Legal Factors
Belonging to the banking and finance sector requires the company to adhere to the regulations developed by different financial bodies. Financial compliance is maintained through following the regulations developed by the relevant institutions such as National Credit Regulator (NCR), Financial Sector Conduct Authority (FSCA) and Financial Sector Laws Amendment.
Capitec Bank also has to implement the employment laws of South Africa. For example, the employment process has to be aligned with the Broad-based black economic empowerment (B-BBEE) framework. The workforce needs to be a representative of the implementation of this framework.
Moreover, the consumer protection laws have to be integrated with the banking operations. The data of the customer needs to be kept confidential and the company has to make sure that the data theft or breach of privacy doesn’t occur to avoid legal issues. Money laundering claim can lead to serious issues and the company strives to retain financial transparency.
Environmental Factors
Banking sector in South Africa is adopting a more environment friendly approach in handling business operations, moving to digital operations and using recycling to minimize waste. The concerned environment protection agencies offer guidelines about the environmental performance goals for the organizations in the banking industry.
Capitec is making efforts to manage the carbon footprint and ensure that the GHG output doesn’t increase and is retained within the baseline. The establishment of new head office was done keeping it aligned with the sustainability goals. Management has reduced paper use and shifted to a more efficient energy based solutions to adhere to the sustainability policy (Capitec, 2022).
Conclusion
In conclusion, the PESTLE analysis of Capitec Bank demonstrates the potential challenges and opportunities that the company may face in the banking industry. The political and economic factors such as government policies and economic position of the country have significant impact on the profitability of the bank. However, Capitec has maintained a positive brand image during the COVID pandemic by offering flexible payment options and catering to the banking needs of people from various socio-economic backgrounds. The technological factors, particularly the use of digital banking, has helped the company expand its market share and simplify payment solutions for its customers. Capitec also strives to adhere to legal and environmental regulations and policies, which has positively contributed to the company’s sustainability goals. Overall, Capitec Bank’s ability to adapt to changing trends and regulations has helped it maintain its profitability and reputation as a reputable banking institution in South Africa.
References
Buthelezi, L. (2022). Capitec’s profits now far exceed pre-COVID levels, as bank adds 190 000 new clients a month. News 24. Retrieved from: https://www.news24.com/fin24/companies/financial-services/capitec-profits-now-far-exceed-pre-covid-levels-as-bank-adds-190-000-new-clients-a-month-20220412
Capitec (2022). 8 ways our new head office is good for the environment. Retrieved from: https://www.capitecbank.co.za/blog/articles/experiences/8-ways-our-new-head-office-is-good-for-the-environment/
Capitec Bank (2022). Annual Report. Retrieved from: https://www.capitecbank.co.za/globalassets/pages/investor-relations/financial-results/2022/annual-report/integrated_annual_report_2022.pdf
Discovery Bank (2022). The rise of digital banks in SA. Daily Maverick. Retrieved from: https://www.dailymaverick.co.za/article/2022-12-09-the-rise-of-digital-banks-in-sa/
Zwane, T. (2020). Drop in Capitec’s earnings indicate Covid-19’s impact on banking sector. News 24. Retrieved from: https://www.news24.com/citypress/business/drop-in-capitecs-earnings-indicate-covid-19s-impact-on-banking-sector-20201001