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Capitec Bank – Redefining Retail Banking: Innovation Through Elimination

By Freek Vermeulen


The consumer banking industry is notoriously hard to enter. Customers rarely switch banks (switching costs are high) and there are considerable barriers to entry to new players. Traditionally, banking products can be complex, often accompanied by non-transparent cross-selling practices and hidden fees and commissions that seem designed to extract as much money as possible from customers, rather than serving them in a customer-centric way. The case is set in South Africa, where around the turn of the millennium the banking sector was dominated by four major players who collectively had a market share in excess of 80%. The established players differentiated customers according to income bracket, rather than the value of the service being provided, and tended to overlook those on lower incomes. There was a large ‘unbanked’ or underserved demographic who lacked almost all access to financial services. The case details how Capitec entered and disrupted the industry by targeting the mass market, including the hitherto unbanked, and by becoming a bank that was open to customers from all income groups and which treated all customers alike. By focusing on three key principles – affordability, accessibility and simplicity – and with a clear customer focus, Capitec was able to stimulate much broader financial inclusion and capitalise on it accordingly, establishing a position in the top four banks and enjoying year-on-year growth in terms of new customers and revenue that far outstripped its competitors.

Learning objectives

  1. Understand business model innovation
  2. Discuss new venture development and scaling
  3. Understand market entry and strategies for growth, particularly in an emerging economy
  4. Illustrate the concept of ‘the fortune at the bottom of the pyramid’
  5. Illustrate Clay Christensen’s model of disruptive innovation
  6. Understand the concept of ‘purposeful evolution’ and how business needs to change and adapt over time


Publication Date: May 2017
LBS Case Code: CS-19-01
Subjects: , , ,
Pages: 22
Format: pdf