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The imminent retirement of one of Stellenbosch’s favourite sons, Chris Otto, the co-founder of PSG Group and later Capitec, brings to an end an illustrious business career, with the success of Capitec the stuff of legend.And Otto is a legend in business circles. Capitec Bank has grown to become one of South Africa’s most successful retail banks, contributing to the economy by creating jobs.The lender, which announced that Otto will retire from its board at the end of July, has amassed an unprecedented 26-million customers, fetching a tidy market valuation of R530bn — more than Nedbank and Absa combined.It’s hard to imagine that when Otto and his associates took Capitec public, there was concern about the future of small banks. Saambou went belly up just nine days before Capitec listed on the JSE in 2002.Well, Capitec is small no more, having grown its profit from R30m in the 2003 financial year to R16.8bn in the 2026 financial year — a whisker from the R17.2bn profit reported by Nedbank in the period.Its client book has surged from 350,000 in 2003 to 26-million in 2026 — with more than 12-million of these on its digital platforms.As Otto leaves the stage, another banking success story is being brewed at Pepkor’s headquarters in Parow — led by another celebrated Stellenbosch executive, Pieter Erasmus.Unlike Capitec 25 years earlier, the retail group is not starting from scratch but is backed by trusted brands with decades of building goodwill with its customers.Pepkor has developed extensive capability in financial services over the years, including retail credit, lending, bill payments, money transfers and insurance.This foundation, combined with the group’s retail footprint and proven ability to acquire customers and brand equity, is ideal for expansion of the group’s financial services offering, it has argued.The retail major has a huge pool of clients to draw into its banking ecosystem; 32-million people visit its stores on an annual basis. It has more than 6,000 stores in its network, more than the branches of the country’s top four banks combined.The opportunity is there for Pepkor to win market share. The challenge will be to convert a large chunk of its client base to its banking platform.Traditionally banks used to capture income and risk segmentation, while retailers like Pepkor would capture footfall, and telecommunications were left to capture the device market. This has all changed, and Pepkor hopes that its banking franchise, PlusB, set for launch in 2027, will deliver single-platform convergence.The early signs look good. Pepkor, in the six months ended March 2026 results, reported a 41% surge in revenue to R3bn from its financial services segment, which lifted the segment’s operating profit 63.4% to R691m.The key leg of its financial services, FoneYam, a smartphone rental product, reported a 32% increase in activated accounts in the period under review, which translates to 1.3-million cellular rental accounts, taking the active base to 2.4-million.The imminent competition between Capitec and Pepkor’s yet-to-be-launched bank will play out in the mass and informal marketsIts data shows that customer take-up of a second FoneYam rental after completing the first has exceeded expectations, effectively extending customer lifetime value.The device market will make PlusB an interesting proposition, as Pepkor already sells eight in 10 smart devices — a key element in the digital banking space.It would appear Capitec saw the fire coming. The bank made two interesting moves in 2025. It launched a platform where its customers can buy smartphones directly and also launched an airtime advance proposition.PlusB and Capitec will also slug it out for market share. The adoption of digital transacting is expected to continue to grow, with the number of Capitec clients active on its app having grown to 12.9-million (20% of the South African population) at the end of February 2026.Pepkor’s insurance proposition covers 1.3-million lives, while its personal loans platform, Capfin, grew its active loan base to 378,000 loans by the end of March.Capfin’s gross credit book increased to R5.3bn in the six months under review.Pepkor’s informal market play is also gaining traction, a market that Capitec, the country’s largest bank by customer numbers, has also eyed building its business lending platform around.Pepkor’s informal market proposition, Flash, reported a 20.3% increase in throughput to R34.7bn, ending the six months under review with 176,000 active traders.It is in the mass market and informal market that the imminent competition between Capitec and Pepkor’s yet-to-be-launched bank will slug it out.Capitec has identified the informal market as a key growth vector, particularly for its business banking franchise.Whether from devices, insurance, banking or value-added services, the battle lines between Capitec and PlusB are becoming more pronounced.For PlusB, the pretender to Capitec’s throne, it will boil down to executives and innovation to earn the right to win in the highly competitive market, where traditional players are also upping their game.
