Competition, Barriers to Entry and Inclusive Growth - Capitec Case Study

This study examines barriers to entry in the South African retail banking informed by Capitec's experiences as an entrant. In some ways Capitec's experience is exceptional. It surged ahead early attempts to bank the excluded from banks such as Ubank (former Teba Bank) and the Mzansi initiative. Capitec's entry and growth in transactional banking sparked a competitive response from incumbents, especially First National Bank and ABSA. The study illuminates how Capitec was able to pursue the opportunities available in this concentrated and highly regulated sector. We also contrast Capitec's success, especially since 2008, to that of other entrants in the retail banking sector. Finally, the study will consider whether there are ways in which the barriers which Capitec faced could be reduced for future entrants. The results show that Capitec overcame customer's reluctance to switch, a key barrier to entry in retail banking, by developing a simple product that is easily understood. It also worked deliberately to convert its lending clients into transactional banking clients.