“Agh, don’t worry about Capitec, they’re too small,” a Standard Bank executive told Kokkie Kooyman nearly 20 years ago. It seems laughable now, but at the time Capitec was just a small microlender with no market share in the banking sphere.
How times have changed.
Today, “it’s arguably the best bank in the world”, says Kooyman, executive director at Denker Capital. It’s high praise, but everything about the bank looks stellar.
Consider the numbers: it has 24-million banking clients, effectively a third of the population; a return on equity of 29% at the end of 2025, which is far above its peers; and its shares trade on a price-earnings (p:e) ratio of 33.4, indicating how much higher it is rated than the other banks . By contrast, Absa trades on a p:e of 8.9 and Nedbank is on 7.2.
For investors, and those pension funds that bought it years ago, it has been a generational success. If you had bought R10,000 worth of Capitec shares 20 years ago, they would now be worth R1.6m – a nearly 16,000% gain.
“The bank delivered continued growth in its client base and an increase in transaction volumes [which] partially offset the effect of the new reduced fee structure,” it said.
So how did this wunderkind of banking come to be?
By not being a bank, it seems. “We are a technology and client-experience business,” claims Capitec, rebuffing the idea that it sits anywhere in the realm of traditional banking. And, truthfully, it does look and feel more like a fintech company.
Capitec’s latest purchase of digital payment app Walletdoc underscores its new determination to conquer the fintech space, hoovering up any competition.
“Walletdoc strengthens capabilities in an area where fintechs have historically moved fast,” Capitec says.
This acquisition comes after its integration of accounting software start-up Stub into its system, and its purchase of controlling shares (97%) in the fintech credit business Avafin.
“It has become a financial services shop,” says Kooyman. “And that changes the whole dynamic.”
SBG Securities, in a research report, says this deal will benefit Capitec’s existing customer base, adding “problem-solving technology” to its suite of services.
“We believe that the payments ecosystem is on the cusp of undergoing a fundamental shift towards digital, real-time, nearly-free [banking]. Capitec has been one of the leading proponents for PayShap and low-cost payments and this acquisition demonstrates the intention to continue to drive this strategy,” it says.
Of course, Capitec hasn’t become successful overnight; it got here by banking the unbanked and making it accessible for them. Now it is reaping the benefits.
“They were helping their clients very early on to slay financial dragons. That became an attribute that is associated with the name,” says Adrian Saville, professor of economics, finance and strategy at the Gordon Institute of Business Science.
“People that use Capitec love Capitec.”
Fostering that goodwill, the bank always set out to make the banking experience easier for its clients, and going digital was always the way forward. After all, the “tec” in Capitec doesn’t stand for nothing.
“At the point they set out to build an app, people were scathing of whether their customers even demanded an app,” says Sarah-Jane Alexander, a portfolio manager at Coronation Fund Managers.
With both digital and physical distribution, the bank can access more clients, and at a fraction of the price that other banks pay to do that.
Today, Capitec competes with traditional bankers and insurers “who generally have far higher costs to serve, expensive distribution, and they’re massively lagged on technology investment”, Alexander says.
With low costs and high returns, Capitec can afford to expand and broaden its product base into insurance, vehicle finance and business banking while gobbling up fintechs on the side, creating a hybrid banking/fintech/business services platform.
“To do that is expensive,” Kooyman says, and it will take other fintech banks (cough, cough, TymeBank) a while “to compete on a serious level with Capitec”.
Of course, the major discourse around Capitec is whether it is worth the price. With every new acquisition and development, the share price jumps – it is currently sitting at about R4,500.
“If you simply look at it mathematically, then it is too expensive,” Kooyman says.
And it’s true; conventional investment metrics all show Capitec as overvalued. You can take its 33 p:e ratio to be a great sign of growth – or a sure sign of bloated value.
“It looks fairly richly priced compared to the growth prospects,” says Saville. Compared to international challenger banks, Capitec’s growth potential is smaller than those of new standouts – multiple experts mention Brazil’s Nubank as a contender.
Nubank is the world’s largest fintech bank, serving more than 100-million customers worldwide. It has expanded by offering digital-only products that stress convenience and low-cost to no-cost services. And its stock trades at a slightly lower p:e than Capitec, at about 30 times earnings.
(In a sign of faith in South Africa’s fintech potential, Nubank invested $150m in TymeBank 14 months ago.)
The maths shows that South Africans have certainly drunk the Capitec Kool-Aid; but experts insist Capitec is worth every penny.
“Until the gold share started rallying, there were very few growth opportunities,” explains Kooyman. Capitec was one of the few businesses on the market that was growing, and consistently – making the bank an enviable commodity in most portfolios.
“It’s very difficult for other businesses to match the frequency of engagement that a bank has with its customer base and the cost at which it can engage,” adds Alexander.
Capitec not only has the invested customer base, but also the lean spreadsheet to be able to compete well into the future with other banks and insurance companies. “We would expect them to keep growing strongly,” she says.
Kooyman agrees. “I would say for what it does, it is well priced – and the share price doesn’t look to be coming down any time soon.
Capitec might be a frontrunner in the banking fintech space right now, but competition is always around the corner. Optasia, a fintech company that listed on the JSE last year and which is focused on digital payments, is one such potential threat.
So is TymeBank, which boasts 12-million customers and became the first digital-first African bank to turn a profit, premised on its super-low transaction costs, and the fact its back-end rests on a cloud-based infrastructure.
Saville says this ability to build new systems, rather than rely on what was already there, helped Capitec hugely.
“One of the advantages that Capitec had early on is that they were able to build brand new bank architecture, and all of the other banks are sitting with legacy architecture,” he says.
Riaan Stassen, Capitec’s co-founder, says it cost the bank R120m to build its entire software system, whereas many of the big banks spend about R3bn over a three-year period on the same infrastructure.
This has, of course, changed over time. As Saville warns: “Keep in mind, that what Capitec is sitting with now trades as legacy architecture.”
While it costs Capitec about a quarter of what it costs the legacy banks to serve its customers, the purely digital banks, in turn, sit at a quarter of Capitec’s costs, which has changed the economics for the industry.
And these new digital banks are targeting the same incoming generation of consumers, often without charging a fee and with a far lower infrastructure cost. This suggests an almighty scrap for market share soon enough.
“All of the established banks, whether it’s Capitec or any other retail bank, they have to be looking over both shoulders,” Saville says.
Still, given what it has achieved so far, experts have faith in Capitec’s ability to be agile and responsive to shifting technologies.
As it is, the jury is out on the extent to which South Africans will embrace fully digitised banking – until then, Capitec has the lion’s share of the fintech banking space, and is leaps and bounds ahead of everyone else.
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