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11 decisions that made a challenger the best bank on the planet

I’ve been in touch with Colin Iles in South Africa for a while now. Formerly the head of client strategy at Barclays Africa (ABSA), he’s now been working on a new bank called Capitec. I say new, it’s actually been around for 17 years, but it is interesting that for a bank launched in 2001 it has succeeded in becoming the second largest bank in South Africa. How did they do it? Colin explains …

Capitec – The Best Bank on the Planet?

Let’s start by laying out Capitec Bank’s credentials.  For a bank that only came into existence in 2001, they are impressive.

Firstly they are now recognised as having the second largest customer base in South Africa.

Secondly, their stock price has grown exponentially compared to their main competitors.

Thirdly, they have been voted the ‘best bank on the planet‘ by the Lafferty Group for the second year running (see link for the full report).

11 Decisions that have helped them succeed

In a previous post, I asked why some companies consistently make better decisions than their competitors with seeming ease?  I’ve highlighted 11 examples that strongly suggest Capitec know the answer.

Decision #1 – Don’t hire industry experts

Not that many career bankers will get the chance to see Capitec from the inside. Riaan Stassen, Capitec’s CEO from 2004 until 2014, said his company stopped appointing staff from other banks years ago. It hires almost exclusively from the retail sector. (source –  Alec Hogg interviews Riaan Stasson, 2013)

Decision #2 – Hire young

According to Gerrie Fourie, the current CEO of Capitec, 82% of Capitec’s 13,500 staff are under the age of 35.  (source – Bruce Whitfield interviews Gerrie Fourie,2017).  Riaan Stassen also states in his interview with Alec Hogg that the focus for Capitec is to ‘Grow its own trees’.  This seems to be working as the average age of a branch consultant is 23 years old (source – BizNews interview with Gerrie Fourie 2017).

Decision #3 – Minimise Hierarchies

Michiel Le Roux, founder and CEO of Capitec Bank up until 2004, sums up their philosophy.

“Here, there is no distinction between people. Nobody flies business class. How you fly, where you stay, the rental car you drive is the same whether you are the CEO or the junior in the company. Everyone gets the same treatment.” (source – Forbes interview Michiel Le Roux, 2016).   The interviewer goes on to add “At Capitec, they take simple seriously. No suits, the CEO’s office is the same size as everyone else’s; the CEO shares a personal assistant, no personalised parking spots, even the guard at the gate calls him Michiel, while the receptionist jokes freely about his sense of style — or lack thereof.”

Decision #4 – Implement Agile Frameworks…for everyone

“Needs are coming in quicker and quicker and we need to adapt much quicker, so what we’ve done is, to move the whole bank onto an agile platform.  We’re working on two-week sprints……Other banks and other companies are [doing this] just on the IT side, we’re doing it right across the whole company. “ Gerrie Fourie Interviewed by Biz News, 2017

Decision #5 – Ensure the leadership team is regularly exposed to the startup community

“Our senior people last year did about 56 trips overseas, and we will probably be close to about a hundred trips overseas [in 2017]” (Gerrie Fourie Interviewed by Biz News, 2017).

Decision #6 – Don’t push your products at the expense of your customers

“Not everything needs to be about making more money off your customers. I can’t stand all those strategies about cross-selling or upselling. We don’t sit around a table and ask ourselves how we can get more money out of our client base. We ask ourselves what our customers need and how we can give it to them in a way that’s different to, and will beat our competitors.” (Source – Riaan Stassen Interviewed by Entrepreneur Magazine, 2011)

Decision #7 – Help your customers use less of your products and services

Capitec launched a campaign called The Live Free Project.   The campaign staged events that highlighted ways in which consumers could enjoy themselves without spending money. Advising consumers not to spend money might seem like a paradox for a bank – particularly given that they were blamed for the debt crisis that triggered the global recession in 2007. But Capitec wants consumers to save money, stay out of debt and live within their means”, says Charl Nel, Head: Strategic Communication. (Source – Riaan Stassen Interviewed by Entrepreneur Magazine, 2011)

Decision #8 – Offer fewer services than your competitors

“When you have a branch network, it is easy to get seduced by other opportunities and start diluting your focus. That hasn’t happened. We prefer to offer fewer things and do them well”, says Le Roux.  (Source – article was written by Andrew McNulty for Leader.co.za, 2009)

Decision #9 –  Focus on the fat tail

“We designed this bank to service 90 to 95% of South Africa’s banking public,” said Fourie. “The wealthiest 5 to 10% of the population we leave for the guys offering private banking services”. (source – Gerrie Fourie quoted by Reuters, 2017)

Decision #10 –  Increase your physical store presence while everyone else goes digital

Capitec now has more than 800 branches after opening 76 in 2016 which is more than Absa’s 719, Standard’s 630, FNB’s 645 and Nedbank’s 513. (source – Reuters, 2017)

#Decision 11 – Don’t expand overseas

Capitec has a model which many believe would travel well, especially in the US, UK and parts of Africa.

“Whenever we’re overseas, we’re talking, keeping our eyes open, and seeing what opportunities there are but currently, the focus is on South Africa. If you’re growing by 100/150,000 clients per month, you need to make certain that you deliver in South Africa and that’s where our focus is currently. If you want to go overseas, you’ll have to take 20/30 senior people to go and really make a success of that. Currently, we need all decks on hand to deliver on our promise, so that’s where the focus is. (source – Gerrie Fourie interviewed by Alec Hogg, 2016)

Capitec’s two secret ingredients

The real question is not whether these were good decisions or not (they obviously were).  I’m also not suggesting that we should simply copy and paste these decisions verbatim (although many of them might apply to your industry).

The real question, is how Capitec have been able to take such good decisions, so often and execute them so skillfully over such a sustained period?

The answer is surprisingly simple.

1. Their purpose is very clear, very compelling and only focuses on benefiting their clients.

2. Their purpose has not wavered since their inception.

Capitec’s Purpose

So why do I believe that Capitec Bank is winning because of a strong, binding sense of purpose?  After all, I’ve never met Michiel Le RouxRiaan Stassen or Gerrie Fourie?

Well…., the evidence is out there in every interview, in every shareholder report and every article written about them, and it has not altered much for over 14 years.

Here are 5 examples:

#1 2003 – Interview with Michiel Le Roux (link)

“[The markets ] core needs are accessibility and affordability – which we can provide”

#2 2011 – Interview with Riaan Stassen (link)

“[our goals are] affordability, greater and more hospitable branch access and simplifiedeasy to understand banking products”

#3 2017 – Interview with Gerrie Fourie (link)

“If you focus on simplicity and transparency and people understand what they’re doing, then they appreciate what you are doing”

#4 2006 – Extract from 2006 financials (link)

#5 2017 – Extract from 2017 financials (link)

The Benefit of Purposeful Decision Making

Having a strong, customer-centric focus, gives Capitec a simple reference point, which enables them to take these types of decisions (and the many 1000’s more that are taken by their staff across South Africa every day) more easily than their competitors.

Their advantage is that decision making can be continually framed around whether the proposal will improve simplicity, affordability, accessibility and personalisation for their clients.

Take another look at the decisions they have taken to date.

Simple, personal, affordable and understandable banking is going to require transparent pricing, stores that open late or on Sundays, limiting the product offerings, not bundling or x-selling accessively, having a management team that regularly visits branches, employing young people with empathy and passion before knowledge, encouraging the use of agile, regularly exploring the best of Fintech, finding the fat-tail of clients and remaining laser-like in your focus at the expense of shorter-term goals and international expansion.

Their Oppositions Purpose

I took a quick look at the four other major South African banks to try to understand if they had a strong and consistent client-centric purpose.
The short answer is they didn’t (or at least it was not obvious from publicly available information)!  
Consider the following mission/vision statements….
Absa – We are focused on our goal to become the financial provider of choice.

FNB –  At FNB our vision is to transform a good business into a great business and to help create a better world.
Nedbank – To be the most admired financial services provider in Africa by our staff, clients, shareholders, regulators and the communities.
Standard –  Our strategy is to build the leading Africa-focused financial services organisation using our competitive advantage to the full.

V’s
Capitec – Everything we do is to make your life easier and empower you to take control of your money.

The difference is significant.  The incumbent banks all want to win, and they all want to beat each other.

Capitec, on the other hand, focuses on solving customer requirements.  Their goal is to help their clients win…not themselves.

Another powerful example of a company that is applying Capitec’s approach is Amazon.  At a recent Equinox event,  Geoff Brown, the sub-Saharan Head of Amazon Web Services was asked why he felt their cloud offering was better than Microsofts Azure…..?

“I wouldn’t know.  I don’t remember ever discussing what our competitors are doing.  Our only focus is understanding what our clients want and trying our hardest to deliver that

Powerful stuff indeed.

Can you replicate their approach?

The answer is yes (but’s it’s not easy and I’ll delve into that next time).

More importantly, though, I’d humbly suggest you must!

As leaders, you are going to have to take big decisions over the coming years if you want to thrive and survive in an exponential world.  Whether you sit on a Board or an Executive Committee or any other leadership position you are going to have to start increasing your focus towards genuinely solving issues for the client rather than the shareholders.

I leave you with 5 questions that might kick-start your move towards becoming a more purposeful organisation.

#1 How can you simplify your client’s experience?

#2 How can you make your products and services more accessible to everyone that could benefit from them?

#3 How can you make your products and services more affordable?

#4 How can you personalize your client interactions so you become partners in creating the future?

#5 How would your organisation change if you asked questions like these at every board meeting, every executive committee and every leadership session?

If you enjoyed this post don’t forget to share with others.  If you want to challenge any of the assumptions of conclusions I draw out, the do let me know by commenting back, subscribing to my blog or emailing me directly.

About the author

Colin Iles is CxO of The Equinox, Africa’s premier Leadership Innovation and Strategy Centre.  Whether facilitating, presenting or writing Colin’s goal is to help organisations unlock their potential so they can thrive in an exponential world.

If you want more information about The Equinox click here.

If you want more information about Colin click here.

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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  • St Chit

    Given Capitec’s move away from Wealth/Private Banking, do you consider this approach is Retail only? How do you think it would be suitable for multinational corporation clients too?

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  • Paul

    This article ignores the reality and history of banking in South Africa. If I were you I would measure a South African bank by the number of customers who actually are economically active. It is misleading to use the number of customers as the only measure. Had you also provided other metrics such as ROE and ROA as well as the profitability of these accounts and compared them to the other banks then your classification would have made more impact. Until then it looks like you have been paid to write a favourable article.

    • Chris_Skinner

      Paul

      I haven’t been paid to write anything, and call you out over implying as such. What you should have seen is that this is a GUEST post, that I thought was interesting. If you have something worthwhile to say, then say it, but you better avoid slinging mud at me personally.

      Chris

    • Chris X

      Hi Paul, I also think you missed the point of this article. The comparison is actually what it is – speedy growth in clientele numbers (bank accounts). Being profitable or not is a question that can also be answered but judging from Capitec’s jump in profit by 19% in 2016/2017 FY, i would say it worked out. Take the leanings, when you do retail, its not always about the maxed out profit, most times it should be about the number of customers you can serve profitably and you are in the sweet spot.