Business Model

1. Business Model

* Low cost banking services through the use of technology and reliance on high volumes.

* Customer Value Proposition: price, real-time delivery, simplicity and personal contact.

2. Should Capitec change its scope as it seeks to grow?

Expand into high-end market segments: this can be seen a broader long-term strategy for Capitec. The majority of the population remains unbanked and this majority falls in the target market that Capitec is currently pursuing. All efforts should be made to capture a greater percentage of this population before Capitec tries to expand into other market segments as it may risk confusing the consumers. That as it may, the reality is that Capitec has seen take up of their products by consumers in the higher income groups. This could be credited to its cost structure and transparency that can be appealing to consumers across the board. The credit crunch of 2008 and the subdued economic conditions have seen a shift in how consumers spend their disposable income and trying to stretch the rand as far as possible and cutting unnecessary costs.

The switching costs are relatively low with some banks now offering to switch accounts from other banks in less than 10 minutes. This becomes an attractive offering for consumers in higher income groups who desire a simple and no-frills banking experience.

Introduce more sophisticated products: Capitec can introduce more sophisticated products to capture other segments of their market. This can be done through an extension of their micro lending facility and capabilities into funding SMMEs focussing on major projects. The South African government announced a multi-billion infrastructure development plan in the 2012 Budget and State of the Nation speeches. Capitec can create special funds that are aimed at supporting SMMEs that have a keen focus on infrastructure development. This would carry a reduced risk and safer returns. Furthermore, South Africa chairs the North-South Infrastructure Development Corridor and this infrastructure programme will extend to the rest of the African countries such as Algeria, Nigeria and Democratic Republic of Congo to name a few. Capitec can strategically position itself to be the bank of choice in the realisation of these projects.

Sophisticated products such as credit cards are potential areas of growth if managed carefully. This should be based on proper market research and weighing of the risks and leveraging their current Global One account format.

Expand into other emerging markets: This would be a longer-term market penetration strategy for Capitec. However, there is an argument that suggests that the South African market has not been fully exploited. South Africa has a large unbanked population at 15 million (about 52% of the adult population) in 2004. Despite the implementation of Financial Sector Charter in 2004, 36% of the adult population remains unbanked. This is still a large portion of the organization's target market that has not been tapped into and attempts should be made to attract them. Lack of trust and transparency is the purported to be one of the major reasons the traditional banks have not been able to attract this portion