Capitec Strategy to success Essay

IntroductionHistory shows that the siemens Afri keep stranding sector has predominately center on middle to upper class income groups in the securities industry, whilst neglecting the wishs and demands of utter income groups (Manson, 2012). Capitec depose on the new(prenominal) hand, foc utilize on the needs of these measly income groups, creating a bloodline model that was specifically tailored to their needs. Capitec was introduced in the banking labor during a cadence of crisis, Saambou Bank, which foc employ in micro lending had collapsed (McNulty, 2009). save Capitec has managed to endure this predicament and since its inception, has emerged as a force to be reck peerlessd with, in a relatively short period of time. The bank has managed to penetrate the S bulge outh Afri domiciliate banking sector with progression in a matter of a few years due to its implementation of the inventive Bottom of the profit ( dance) outline aimed at designing the lower end consumers (van Themaat et al, 2013). It is then essential to prize the vex sex strategy, a pine with all of its aspects. For this reason, this essay impart examine the score of Capitec Bank and in particular outline the happy adaption of the BoP strategy as well as its growth and current position in the banking sector. still, the of import objective that will be discussed in detail will be on the aspects of Capitecs strategy crucial for leverage in its position in the South African banking sector.HistoryCapitec Bank was founded on the 1st of March 2001 and built back on its micro quote business, keeping in mind its intention to establish a comme il faut bank in the microfinancing platform (Manson, 2012). Microfinance is a term ingestiond to get a line the provision of pecuniary operate in addition to microcredit to small businesses and the croup of the pyramid (BoP) race (van Themaat et al, 2013). Initially, Capitec started as a 300-branch micro-loan business with the sole merchandise being 30 day loans with a 30% monthly invade. Imperatively, this business of micro-loans supported the strategic aim and complementary cost of building out an underlying foundationnecessary for a dealingsal bank (Ashton, 2012). Based on statistics it is found that BoP is more than than cardinal thirds of the population that survive on bargon minimum income (van Themaat et al, 2013). moreover Finscope 2003 estimated that 35 portion of the total population in SA induct never banked or used any financial armed assistant to manage their finances. With relation to the above, it is recognized that other financial institutions throw off serving the BoP as they are perceived as non-profitable (Coetzee, 2003). However on the other hand, Capitec recognised this market as a window of opportunity as the studyity of this population remained unbanked due to the many cons calculatets that prevented them from obtaining financial service (van Themaat et al, 2013, robin red breast et al, 2005). The bank implemented its profit-driven strategy by customising its operate and products to the needs of the BoP to achieve the following satisfyingness, Availability, Affordability and Awareness, thereby overcoming the constraints that existed. (Coetzee, 2003, van Themaat et al, 2013, Robin et al, 2005) This approach deemed successful which has resulted in an increase of market share with 51.23 percent compound interest over the last five years which is in line with its goal of being a profit-driven microfinancing institution (van Themaat et al, 2013). These aspects used by Capitec Bank to penetrate the banking sector will be discussed in this paper.AcceptabilityAs mentioned previously in the history, Capitec overcame many constraints that had previously left the BoP sector unbanked. The founders of Capitec critically evaluated the BoP and found that many are embarrass by their lack of education, skills, literacy, are unable to afford basic financial work a nd that their perceptions of banking is that it is complicated, expensive, difficult and time consuming (van Themaat et al, 2013). Capitec offers a simplistic and acceptable approach to banking which has swapd these perceptions taking into consideration that the Bop are first time users. Capitec Bank (2014) displays Capitecs product offer which is a planetary unity report that incorporates a savings, deposits and a credit facility which determines for unprejudicedr banking offering exceeding utility and value.Capitecs interaction with thickenings are face-to-face, paper-less, cash-less and card-based (Haladjian, 2006). Overcoming the lack of confidence and literacy skills in first time BoP clients was achieved by the paperless IT and management information arranging (van Themaat et al, 2013). This also incorporated biometric identification using fingerprint technology and cameras to let on their clients which creates ease of use and quicker response time (van Themaat et a l, 2013). Overcoming the language restraint was achieved by employing staff from the local communities. (Robin et al, 2005). Capitecs investment into human pick training has made for streamlined interaction with clients strengthening customer-to-bank relations and by eliminating a bulletproof glass barricade, clients receive a personal service and are treated importantly, which makes transacting a more approachable service. (Coetzee, 2003) By treating their customers with respect, this increases the aflame appeal to the BoP population. As compared to service in a walloping four branch, the Bop customer is treated as inferior and unvalued, therefore Capitec defines it focus by customer and not by income (van Themaat et al, 2013).The customer embrasure systems at ATMs have been adjusted to the needs and preferences of the BoP catering for illiterate clients. (Coetzee, 2003) The management IT system is centrally controlled, increases simplicity and customer value by reducing adm inistration costs, paper work, prevents fraud and keeps overcome of transactions using fingerprint biometrics. (Coetzee, 2003, van Themaat et al, 2013) It also creates a safer surroundings as cash is not kept at branches and withdrawals are visible(prenominal) at ATMs and selected retail stores considering that many unbanked sectors exist in areas experiencing high crime and this positively contributes to driving down financial service costs (Coetzee, 2003, Haladjian, 2006). Opening an account takes ten minutes. After credit valuation and approval, the loan application process is as follows skip ID document and contain using barcode, scan payslip, take a photo of the client, capture other data, dissipate account, print loan agreement, allow client to sign, then scan and return the original, create an ATM card and give card to the client (Coetzee, 2003).Coetzee 2003 highlights that this previously unbanked population deemed asundesirable and unprofitable are being served by Ca pitec Bank in large volumes since its inception. This further proves that the strategy of simplifying its service implemented by Capitec appeals to the Bop population allowing Capitec to penetrate the banking sector.AvailabilityCapitec makes their services more available to customers by having long business hours, increasing the spot of branches, allowing withdrawals at retail outlets, using ATMs, mesh banking and applying for credit online. match to Planting (2006) Capitec Bank has extended their business banking hours. On weekdays branches are yield from 8am to 5pm (Manson, 2012). around of the branches of the bounteous four banks Absa, Nedbank, FNB and Standard bank close at about 330pm or 4pm. Capitec considers that most customers are working and can only approach branches after working hours which is around 4pm. In about cases branches are loose till later where it suits customers and branches are also adequate of going to the workplace of customers to offer their se rvices (Coetzee, 2003). On Saturdays branches are open between 8am to 1pm and on Sundays branches in large shopping centres are open between 10am to 2pm (Manson, 2012). Most of the big four banks branches close on Saturday at about 11am and on Sunday most branches are not open. These times considers that customers may not be able to do their banking during the week because of long and tiring working hours. They understand the needs of customers by offering longer business banking hours. Capitec knows that their customers need to reach their branches easily. This is done by reducing the coat of branches and increasing the quantity of branches (Manson, 2012).They would rather have more branches in one area than have one big branch. Many people do not save because they do not have access to banking services (Finscope, 2003). Increasing the number of branches increases accessibility and savings will be encouraged. using this approach makes their services fond and convenient for cust omers. Initially Capitecs main target focus was the BoP. Branches are laid at tax incomei ranks, train stations and townships where their services are easily available to the low income group. They have expanded over the years, making their services available to the other income groups by locating branches near rural areas and in shopping malls. Capitec uses existing cornerstone to improve banking service accessibility. They have partnered with retail outlets such as Checkers, calve n Pay, Shoprite and Pep. Customers can withdraw cash at these retail outlets. Most of the retailers allow cash to be withdrawn when purchasing items at the stores drop at Pick n Pay no purchase is postulate to make a withdrawal. They have increased their network location by allowing withdrawals at retailers without having to invest in any large infrastructure (Kim & Mauborgne, 2005). This allows light(a) access to money and convenience for customers. Capitec ATMs are located across SA making them e asily accessible.If customers cannot access an ATM to withdraw cash, they can always go to retail outlets making their services more accessible and unique compared to the major banks. The ATMs can be used to check equalisers, withdraw cash and multi-loan, transfer money to savings plans and change a pin. The availability of services offered by Capitec is improved by partnering with MasterCard. card are developed to allow customers usage even in upstage places (Lee, 2010). Mobile banking is also used by Capitec customers can use their electric cell phone to access multi-loan, savings plans and savings account. It can be used to purchase airtime and electricity, check account balances and previous electricity tokens purchased, withdraw multi-loan and make payments to clients who bank with Capitec, transfer money between your accounts and register for SMS update for credential purposes. Capitec offers internet banking that is simple, safe and saves the customer money.Money can be m anaged whenever it suits the customer. net profit banking allows customers to transfer money between their accounts, create stop orders, check their statements, tax interest certificate, payment history and register for SMS update system. Customers first need to access their nearest branch to register for mobile or internet banking and to find out how it works. After registration customers can easily access their services when it suits them. They also allow customers to apply for credit online which increases availability of their services. A credit application must be completed online and they will tinge the customer to discuss it with them, making credit application easily accessible. The use of EMP technology and cards linked to maestro allows customers use of their cards offline, offering services in areas of limited access such as rural communities (Haladjian, 2006). Using these strategiesCapitec has made their services more available and convenient for customers, thus impro ving the banking sector. These strategies used have increased their client base and resulted in the growth of bank. Businesstech (2014) reveals that Capitec has overtaken Nedbank and is now the fourth largest bank with approximately 10.8 per cent market share. AffordabilityA substantial component behind Capitec Banks successful business model was its development of a strategy aimed at thought the needs of its customers which were the bottom of the pyramid population (van Themaat et al, 2013). This prompted the bank to offer low-priced banking products and services that were specifically designed in accordance to its customers needs. Capitec centred on having simple banking products and services and sought out to have the lowest fees, hence arguably making it the most affordable bank to bank with amongst many of its competitors in the banking sector (Manson, 2012). In order to understand this strategy, it is imperative to highlight the banking products and services Capitec offered which allowed it to penetrate the banking sector in South Africa as well as making a comparative analysis with the products and services of some of the major banks in South Africa.The fundamental factor of Capitecs success is its Capitecs Global One account which comprises of three distinct features it allows an individual to have the ability to transact, save and access credit, all with one account (Capitec Bank, 2014). The might of this account ensures that customers do not have to open three bust accounts which cuts down on administrative costs. The monthly administration cost for the Global One account inclusive of all its aspects as of 01 March 2014 sum of moneys to R5.00 (Capitec Bank, 2014). Furthermore there is set-apart access to card, mobile as well as internet banking and in so doing makes it more appealing to Capitecs target market (Manson, 2012). Comparing Capitecs Global One account with that of its counterparts from the big four banks in the table below, it can be seen that this account is more superior in terms of its features and much more cost efficient than the rival accounts of other banks.BankTransactional paperSavings direct inlet CreditCapitec- Global One AccountYESYESYESFNB- Easy AccountYESYESNOAbsa- Flexi AccountYESYESNONedbank- Ke Yona AccountYESNONOStandard Bank- PlusPlan AccountYESYESNOThe Global One transaction feature allows you to transfer, deposit or withdraw money as well as to make purchases and payments (Capitec Bank, 2014). The fees that Capitec charges relating to the transaction aspect on this account is by far the cheapest in similitude to the transaction accounts of the big four banks. Fees relating to all card purchases are let go of whether you purchase at card machines, shop online, order by reverberate or with mail. Money transfers to own accounts are also free and to other accounts is charged at a fee of R1.05. Balance enquiries through all channels are also free. (Capitec Bank, 2014) The savings component on the Global One account allows an individual to have four antithetical savings plan which has the ability to earn interest ranging from 4.40 to 9% depending ontheir plans. These plans can also be flexible or fixed tally to ones preference. With flexible savings, people can earn from 4.40% interest on their daily balances as well as choose the amount they want to deposit and the frequency of their deposits (Capitec, 2014). Another advantage to these plans is that there is no monthly admin fee that has to be paid to each account as well as no minimum balance required in order to start saving.Fixed-term savings gives one the ability to choose from two deposit options. The first is a single deposit which can thaw from a period of 6 to 60 months with a minimum balance of R10 000 and a maximum investment of R5 million (Capitec Bank, 2014). The second option is two-fold deposits which can run from a period of 6 to 24 months with a maximum investment amount of R1 million. The interes t rate is fixed for the upright term and interest gained from this option can either be reinvested or transferred to back to ones transaction or savings account (Capitec Bank, 2014). Having a look at the competing accounts of the other major banks which can be seen in the table below, most offer interest rates that are less than 1%. Capitec on the other hand offers highly hawkish interest rates which make it more lucrative for people to bank with them as they are able to earn more on their savings.BankCapitec- Global One AccountFNB- Easy AccountAbsa- Flexi AccountNedbank- Ke Yona AccountStandard Bank- PlusPlan AccountInterest Rates4.40 to 9%0%