Market overview
A view of the market
Industry sentiment – A market observer recently reflected as follows on the banking industry: “People are frustrated by the complex offers by banks, suspicious that they are being done in and resentful that they have no other options. They do not believe that banks work for them to make their lives easier or better.”Complexity, rigidity, uncertainty, misunderstanding that causes suspicion, a lack of personal support and unexpected fees on accounts, are all recent characteristics of the industry that contribute to this negative sentiment towards banking. Few processes offered by banks are ever seen as easy or convenient, and few products are seen as significantly different to any alternatives in the market. Even though banking is an integral part of consumers’ lives it is regarded as a grudge purchase and in many instances seen as a commodity.
Leading technology
It is surprising that this perspective has evolved towards South African banks, as the technology and quality of systems used by the players in the industry are of the best in the world. The problem possibly stems from the approach followed by the traditional banks towards process design and the use of technology as a solution. This has primarily been from a bank perspective, focusing on administration and control, rather than from a client perspective, focusing on ease of use. Whatever the cause, it has resulted in procedures that are complex, cumbersome and inconvenient for the average consumer.The need for easy everyday banking
Everyday banking is about daily transacting, saving and lending. Ideally, it should offer personal support on an ongoing basis, to help clients manage their cash flows in times of surpluses and shortages. This personal support should focus on providing options and enabling clients to make choices that best suit their needs.Mortgage bonds, asset finance and foreign exchange, on the other hand, have become commodities, where pricing generally determines the choice of supplier. Intermediaries or originators are a part of this segment of the industry and they will continue to entrench the “commodity status” of this sector over time.
Everyday banking, however, centres on client relationships and addresses daily client needs in an easy, cost-effective and convenient way.
Innovation focused on simplicity and ease of access
Antoine de Saint-Exupery said, “Perfection is achieved, not when there is nothing more to add, but when there is nothing left to take away.”Koichi Kawana refl ected on simplicity: “Simplicity means the achievement of maximum effect with minimum means.”
Capitec Bank strives to make banking as simplified and accessible as possible with personal support which empowers clients to make their own best choices. The bank’s innovative system design has concentrated on client usage, where the focus is on immediate delivery of flexible products and services with the least amount of input and effort from the client. An open-ended, single-product solution to manage cash flows will ultimately deliver a range of saving and lending options that clients can specify and design themselves.
All branch processes are controlled by a single card, a Personal Identification Number (PIN) and biometric verification. Innovative process design on the system, backed by biometric verification and photo confirmation, provides an in-branch process where clients never fill in forms. A deposit need not take longer than 60 seconds. This results in an efficient process that is both low-cost and highly convenient to clients.
Transparency
Our philosophy is to apply transparent pricing to all our products and transactions. Few clients making use of the traditional banks are aware of their total monthly banking costs. We do not apply ad valorem fee structures, and transactions are not packaged with volume limits which, when exceeded, result in increased fees to the client. Capitec Bank’s fees are fixed per transaction and are less than half those of traditional banks. This empowers clients to make choices which minimise uncertainty regarding monthly banking costs and eliminates discontent regarding unexpected fees. It also reduces the need for balance enquiries and statements, often used by clients to understand their cash flows and fees on their accounts.Our cashless branches offer cash via ATMs only. This provides an environment that supports overall client safety. The safer environment in turn enables the bank to offer extended banking hours beyond 08:00 and 17:00 and to reduce costs of access control and safety barriers. This philosophy also supports an open environment that facilitates better client interaction and support.
The realtime capability of our open-ended system means that clients never enter a branch with a need that is not fully addressed immediately. Clients in rural areas often travel long distances to access a bank to address an urgent need. The immediate support of this client is therefore important to us.
The introduction of Internet banking and SMS Update during 2008/09 has provided more convenience, control and information on accounts for our clients. SMS Update automatically informs clients of deposits or withdrawals on accounts, subject to a minimum transaction value which a client chooses. The uptake of these services, particularly SMS Update, has been exceptional and emphasises the need for information and control in the market. It is furthermore handy to curtail fraud on client acounts.
Biometric verification in branches was extended during 2008/09 from the identification of consultants on the system, to include client verification and verification of each client transaction. This enables signing agreements by fingerprint which reduces the administrative burden on clients in branch.
Capitec Bank will continue to be innovative to meet the needs of the overall market and deliver solutions to everyday banking that are the ultimate in simplicity and at the lowest cost available in the market. We believe we have delivered unique banking solutions to date, but we know that many challenges still exist. Future plans therefore include more significant innovations which will continue to revolutionise banking in South Africa.
