New South African bank ready to take on Capitec

Old Mutual Bank, backed by the powerful Old Mutual investment, savings, and insurance group, is getting ready to fight Capitec.

Old Mutual recently announced that it has appointed Clarence Nethengwe as the bank’s new chief executive.

Nethengwe is an Old Mutual stalwart who has previously overseen the insurer’s unsecured lending business and finance division.

The company said Old Mutual Bank had completed its R1.75 billion bank-build process and received section 17 approval from the Prudential Authority earlier this year.

Armed with a new CEO and all the necessary systems and approvals, it is set to launch before the end of the year.

What sets Old Mutual Bank apart from new market entrants is that it is starting with 1 million customers.

Despite not having a formal bank, Old Mutual has played in the space for some time with its transaction Money Account.

Bidvest Bank currently administers this transactional banking account. However, this will change before Old Mutual’s new bank launches.

Old Mutual CEO Iain Williamson said this offering already significantly contributes to the insurer’s profitability.

The insurer has over one million clients using its Money Account, and its unsecured lending business has a book worth R16 billion.

Old Mutual’s home loan book totals over R5 billion and is currently housed in a separate subsidiary.

Although Old Mutual would not say it is directly competing with Capitec, it is going after the same market segment.

Old Mutual Bank will target South Africans earning between R5,000 and R80,000 monthly. This is Capitec’s stomping ground.

Old Mutual will offer banking services to the 3.1 million low-income South Africans its Mass and Foundation insurance cluster serves.

This cluster serves low-income and lower-middle-income individuals, who typically earn between R1,000 and R30,000 per month.

Capitec not too concerned about Old Mutual Bank

Capitec CEO Gerrie Fourie said he is more concerned about the competition that international brands like Apple and Facebook could bring than local market players.

In April 2024, Fourie told Daily Investor he is not concerned about Old Mutual entering the market.

“Old Mutual has been a bank for quite a while. They rented a bank license. So, the offer has been exactly the same – they’ve been offering banking services,” he said.

“They are now just getting their own banking license and their own banking system.”

“What that offer looks like we haven’t seen, but I don’t expect that it will materially change from what they’ve done in the past. So, let’s wait and see what comes out of the banking system.”

Fourie said Capitec has built quite a compelling offer over the past couple of years, which created great client loyalty.

He said other companies concern him more than Old Mutual. “I’m much more worried about your international players with strong brands than the South African players,” Fourie said.

“We always watch them, and we’re always careful, but the brand positioning of international players – I am watching that space more.

“But we are working the whole time to make sure our client needs are satisfied. And we’re delivering what the client wants.”

Fourie said many international players could disrupt South Africa’s banking space, and he identified Apple and Facebook as two potential competitors.

“Apple is an unbelievable, strong trade name. And if they come into South Africa with full banking, that’s a strong proposition,” he said.

However, he said that, ultimately, the player who understands the client’s needs the best and delivers on them will be the one who wins.

Read: Battle of the banks 2024: Capitec vs Standard Bank vs FNB vs Absa vs Nedbank