How Capitec is disrupting business banking

Capitec has quietly but aggressively launched an onslaught on its major rivals, and at the same time moved to fend off the threat posed by payment/fintech startups such as Yoco and iKhokha.

The latter category has exploded in recent years with a model that upended the typical one offered by banks that is premised on a monthly device rental and relatively steep transaction fees for customer swipes.

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The traditional Big Four banks tend to charge a rental fee of around R400 a month for these terminals (which South Africans love to refer to as Speedpoints – now a registered trademark of FNB).

Coupled with this, they charge a fee per transaction which tends to hover in the 2% (debit card) to 3% (credit card) range.

Most banks also obfuscate these fees and require an application to “discuss transactional costs [which] are tailored to your business and dependent on your business’s annual turnover”.

Shaking things up

Last year, Capitec made two fundamental changes to its model for merchants:

1. First, it changed the model for devices from a monthly rental to up-front purchase; and
2. Second, it permanently slashed its transaction commission rates by as much as 60%.

It sells its two card machines, the Print (‘normal’) and Pro (touchscreen with no printing), for R1,999 and R1,499 respectively.

This makes the payback period – versus the banks’ rental models – between four and five months.

Yoco, by comparison, charges R1,999 and R1,299 for similar models. However, it now levies a R49 per month “connectivity fee” for these terminals. Ikhokha’s machines are even cheaper at R1,499 and R999 (R799 special offer currently) respectively.

When Capitec changed its model towards the end of last year, it launched disruptive pricing from September to November of R999 (Print) and R499 (Pro).

These prices – and the entire value proposition – are only available if transactions are settled into a Capitec account.

Uptake?

It sold 5 000 card machines in the first 10 days and signed up nearly 11 000 merchants in the month of September 2024.

In the six months between March and August 2023, it opened 21 000 business accounts.

In the same period last year (2024), it opened 69 000 accounts.

This is a 77% increase from the amount opened “compared to February 2024”.

And the decreases to its commission rates for merchants are stark.

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For annual turnover under R499,999, rates are now 0.85% for debit card and 1.85% for credit card transactions (all excluding Vat). At the R500,000 to R999,999 level, these drop to 0.7% and 1.7%. And for turnover of over R1 million, they are 0.6% and 1.6%.

Capitec maintains this pricing is the “first to market” and is the “lowest maximum rates in South Africa”.

These rates are generally less than half of the rates being charged by the major banks.

Read: Capitec now has as many clients as Standard Bank, Absa and Discovery Bank combined [May 2024]

Yoco’s rates are a blended 2.5% to 2.7%, depending on your turnover (up to R200,000 – this appears to be a monthly figure – whereafter it will offer custom rates).

The blended rates are deceiving in that Yoco is using debit card transactions (less risk) to offset credit card (more risk) ones.

Ikhokha’s rates are also in this range at between 2.5% and 2.75% per month for transactions up to R100,000, whereafter it will offer a custom rate.

Fees update

In its Wednesday pricing update, Capitec has now finally harmonised all personal and business banking transaction fees. From 1 March 2025, these will be the same for all transactions.

The only difference is the monthly account fee.

Business customers will pay R50 a month for the administration fee, while for personal Global One accounts, this is R7.50.

The singular major change it made this year is that it will require a minimum balance of R150 in business accounts for these to remain active.

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