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Describe the Critical Element of the Business Model of Capitec Bank

Essay by   •  November 13, 2015  •  Case Study  •  1,828 Words (8 Pages)  •  2,249 Views

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Question 1

Describe the critical element of the Business Model of Capitec bank.

Value Network Partners:

  • The unbanked population
  • IT companies that could assist in developing cutting edge, innovative technology that helped Capitec to give effect to its vision of simplistic and affordable banking
  • Retail giants as part of distribution channel – Checkers, etc.


Market Segment


Value Propositions

Customer Relationships

Customer Channels

The lowest income groups previously considered ‘unbankable’

-Global One

-Simplified Micro lending

  • Accessibility to banking services
  • Simplified, paperless processes
  • Free account balance notifications
  • Zero-minimum balance requirement

-Personal service in native langue.

-Status neutral interactions; respect and dignity standard to all customers; customers are never embarrassed through discriminatory treatment

-534 branches and 2076 ATM’s

-Close to bust terminals and taxi ranks

- Access to banking from retail shops , Shoprite, etc.

-Mobile customer service at workplace or residence

Processes’ and Resources:


  • Highly innovative banking processes
  • Simplified banking processes making banking easy, quick and convenient

Strategic Resources:

  • Staff that understands and can relate to their customers needs
  • Modern buildings and amenities that does not distinguish or differ based on location, such as high end and lower markets
  • Cashless banks which minimize the security risk of employees
  • Highly innovative human resources team which keeps up with the PESTLE environment
  • Cutting technology enabling easier and quicker banking processes

Cost Structure:

  • Simple, no-frills product offers
  • Transparent and affordable pricing models
  • A lean network of branches across SA
  • Minimized administrative functions due to automation of most processes

Revenue streams:

  • High volume, low value transactions
  • Interest on lending rates (affordable)

Profitability and Sustainability:

  • Consistent share –price growth
  • Envisages to add 55 additional branches over next 5 years
  • Market rate growth at 70 000 new customer per month currently

Question 2:

What were Capitec’s KSF and how well were these KSF’s employed?

  • The skills and ability to think disruptively and to break the convention around traditional, firm banking perceptions
  • The courage to take a risk into untested, new section of the market with a services that was previously considered somewhat exclusive
  • The realization that a certain sector of the employed market in SA have some disadvantageous in terms of literacy, and sculpting a product that could address this market with respect and dignity
  • Being able to offer a innovative, world-class banking service to a population previously disregarded by the financial industry

Question 3:

Does an analysis of Porters Five Forces provide useful information in support of Capitec entering the South Africa banking industry? Explain

Yes, it does provide useful information.  Discussion:

  • Threats of new entrants

The banking sector was traditionally thought off as being mature, with the big 4 banks dominating 90% of the market. Micro-lending was an attractive industry in the late 90’s but very little offered very threat to the established banks. The banking sector is often monopolized and a highly regulated sector ; as a result it is very seldom that a entrant can considered strong enough to pose a threat to existing players in the field.

  • Bargaining power of Suppliers

The financial industry is not crucially reliant on suppliers. Its service orientation makes it mostly self-reliant. One key supplier was the provider of its IT system which had to cutting edge and highly innovative. Close relationships had to be build and maintained with this supplier, but it hardly shifted the bargaining power towards the supplier.

Capitec would most probably have needed startup capital to initiate the lending process on a bigger scale from the previous micro-lending sphere which had a much higher rate of return. Prospective investors would consider this a high risk investment and the cost of lending would most likely reflect this uncertainty which gave suppliers of capital quite a bit of bargaining leverage.

  • Bargaining Power of Buyers

The buyers at the low end of the market do not really have much bargaining force. Their often minimum wage gives them very little negotiating leverage; there demands are simplistic and they often settle for what they are being offered.

  • Threats of Substitutes

Capitec’s target market at this point considered micro-lending as very viable and attractive alternatives. Capitec however had strategies in place to try and make products that will seek to satisfy that need by offering a product at cheaper rates with more convenience to the customer.

Industry Rivalry

The “ Big Four” was starting to realise the attractiveness of Capitec’s market and were starting to create products that would rival Capitec’s most popular packages (FNB’s EasyPlan, etc.) This rivalry is likely to both continue and increase as Capitec’s formula become more proven and sustainable over the long term.



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