Capitec built its position on an assumption that most of the banking industry did not support: that customers who are struggling today will become valuable in five to seven years if their financial lives develop normally. By that time, their income will increase, they will establish a credit history, and they will maintain trust in the bank that was there when they had nothing.
The market reacted to this bet with a valuation of around 30 times earnings, which is about three times higher than the multiple of other South African banks. However, the question remains whether the structural advantages underpinning this model can withstand the onslaught of an emerging competitive environment.
The first bet was that poor customers gradually become wealthy. This conclusion is based not on a published strategy but on data analysis. Over the last financial year, Capitec's fully serviced customers—those who use the bank for savings, loans, and spending—increased by 12%, reaching 9.9 million people. The total number of retail banking customers grew by 7%, reaching 25.2 million. Meanwhile, customers earning over 50,000 rand per month increased by 21%.
These new affluent customers are not those who came from outside; Capitec's acquisition model is focused on the mass market. It concerns existing customers whose financial situation has improved while Capitec maintained the relationship with them. If the trend continues, more customers will have higher incomes, use the bank's services across all areas, and meet the requirements for larger products.
There is a risk that this flow will slow down. High youth unemployment—exceeding 60% by an expanded definition for ages 15 to 24—limits the speed of income growth for young people entering the job market, and wage growth is not keeping pace with inflation. Furthermore, new banks may poach these customers before their lives improve or before switching costs become significant.
The second bet concerned maintaining branches and ATMs while other banks were closing them. Most major South African banks came to a similar conclusion: branches and ATMs are expensive, digital customers do not need them, and efficiency requires closing such points. Between 2019 and 2024, large established banks closed a total of 8,249 ATMs: Absa closed 3,500, Standard Bank 3,759, and FNB 990.
Capitec went in the diametrically opposite direction, adding 3,787 ATMs. The reason for this is that about 60% of low-income South Africans still withdraw most of their income in cash. A bank that closes its ATMs does not modernize services for such a customer; it effectively abandons them.
Capitec can afford this expansion due to higher operational efficiency: it spends 39 cents to earn 1 rand of revenue, compared to 49–54 cents at other banks. Although operating costs rose by 12% last year, net interest income after loan write-offs increased by 18%, and non-interest income by 19%. A bank operating at a cost-to-income ratio of 39% is able to absorb rising branch and ATM costs differently than a bank with a 54% ratio.
However, the space Capitec is entering will not remain unoccupied. Pepkor, whose retail portfolio in South Africa includes over 2,500 stores (Pep, Ackermans, Dunns, Shoe City, Tekkie Town), exceeds the combined network of branches of the four largest banks. In April 2027, Pepkor is launching its own bank under the working name plusb, and its CEO, Merwe Scholtz, began his career at Capitec. The company's goal of 1.8 million core banking customers by 2032 seems modest compared to Capitec's base, but it is aimed directly at the customers Capitec believed it owned.
The third bet relates to using the phone as a banking window. Capitec Connect launched in September 2022 on Cell C's infrastructure and is now the largest virtual mobile network operator in South Africa, with 1.5 million active customers, up from 900,000 a year earlier. Net profit confirms this dynamic: 35 million rand in the 2024 financial year, 193 million rand in the 2025 financial year, and 442 million rand in the 2026 financial year.
Nevertheless, the business related to telephony is primarily not a connectivity issue. About 80% of package sales occur within the Capitec banking app, and every purchase provides Capitec with valuable information: when customers buy data, how much they spend, and what they can afford. For a mass-market customer who withdraws most of their income in cash, the phone reveals what cash transactions cannot show, expanding Capitec's visibility into financial behavior between banking operations. This mechanism is structural and consistent, although it cannot be verified through public sources: Capitec does not publish data on how Connect's behavioral signals influence lending decisions.
The risk is that this advantage only matters if Capitec controls the relationship with the phone, which it does not. Cell C controls this aspect, including the IMSI range. Large-scale migration is commercially unviable because free calls within the network only work if every subscriber is in the same Cell C core. With an annual net profit of 442 million rand, the MVNO has become significantly significant, and if Cell C changes wholesale access pricing, or Capitec cannot negotiate hard due to the importance of the relationship, the entire mechanism will collapse. Capitec has not publicly stated a migration strategy. The unsecured dependency is hidden beneath the very mechanism that should deepen the data advantage.
Capitec earned 16.85 billion rand last year—less than the retail operations of Standard Bank and FNB (24.9 billion and 23.6 billion rand respectively in their latest financial years), despite having significantly more customers. This paradox lies at the heart of the premium valuation. The market is betting that these three gaps will close over time:
Firstly, deposits: Capitec holds less than 10% of South Africa's retail deposits, despite leading in customer numbers. Capitec's customers have less money to deposit, and deposits fund the loan portfolio—a larger and more stable deposit base provides a larger, higher-yielding portfolio with lower costs. This is the foundation upon which everything else depends.
Secondly, intensity of banking services: only 39% of Capitec's customers use the bank for everything. A customer using one product generates revenue only from that product; a customer using five generates five times more. This figure is improving but remains at 39%.
Thirdly, type of lending: Capitec mainly issues short-term personal loans for urgent needs—5,000 rand for emergencies, 10,000 rand for crises, whereas other banks issue 500,000 rand for housing. Small unsecured loans carry higher risk and potentially higher returns, and the risk is manifesting: the loan loss ratio increased from 7.5% to 8.1% last year, and provisions for losses increased by 21% to 9.98 billion rand—although a significant part of this deterioration is due to AvaFin, Capitec's European lending acquisition, rather than its South African portfolio. If loan losses continue to rise, the growth story will not work because the money will not come back.
None of this means the premium is wrong. It means the premium assumes the closure of these gaps: that poor South Africans will become less poor, save more, and take out loans for larger goals—and that the bank that maintained the relationship from the beginning will benefit the most. This is a bet on economic mobility, and mobility does not happen at a constant rate.
Capitec is structurally a different bank with a different customer base and a different economic model, and currently, all three of its bets are working—the data shows this. But the foundation is fragile in one area: the relationship with the phone, which it does not control. The structural position is real, and the pressure on it is also real. Whether the premium survives depends on whether Capitec can defend its bets while new competitors simultaneously test all their aspects. It is not guaranteed, but it is not impossible. It is truly uncertain—and it is worth watching.
