Competition, Barriers to Entry and Inclusive Growth - Capitec Case Study

49 Pages Posted: 6 Feb 2016

See all articles by Gertrude Makhaya

Gertrude Makhaya

Centre for Competition, Regulation & Economic Development (CCRED)

Nicholas Nhundu

Centre for Competition, Regulation & Economic Development (CCRED)

Date Written: 2015

Abstract

This study examines barriers to entry in the South African retail banking informed by Capitec's experiences as an entrant. In some ways Capitec's experience is exceptional. It surged ahead early attempts to bank the excluded from banks such as Ubank (former Teba Bank) and the Mzansi initiative. Capitec's entry and growth in transactional banking sparked a competitive response from incumbents, especially First National Bank and ABSA. The study illuminates how Capitec was able to pursue the opportunities available in this concentrated and highly regulated sector. We also contrast Capitec's success, especially since 2008, to that of other entrants in the retail banking sector. Finally, the study will consider whether there are ways in which the barriers which Capitec faced could be reduced for future entrants. The results show that Capitec overcame customer's reluctance to switch, a key barrier to entry in retail banking, by developing a simple product that is easily understood. It also worked deliberately to convert its lending clients into transactional banking clients.

Keywords: barriers to entry, retail banking, Capitec

JEL Classification: D04, D22, D43, D41, L5

Suggested Citation

Makhaya, Gertrude and Nhundu, Nicholas, Competition, Barriers to Entry and Inclusive Growth - Capitec Case Study (2015). CCRED Working Paper No. 12/15. Available at SSRN: https://ssrn.com/abstract=2728273 or http://dx.doi.org/10.2139/ssrn.2728273

Gertrude Makhaya (Contact Author)

Centre for Competition, Regulation & Economic Development (CCRED) ( email )

5 Sturdee Ave
Johannesburg, GP, 2196
South Africa

Nicholas Nhundu

Centre for Competition, Regulation & Economic Development (CCRED) ( email )

5 Sturdee Ave
Johannesburg, GP, 2196
South Africa

Register to save articles to
your library

Register

Paper statistics

Downloads
216
Abstract Views
830
rank
143,478
PlumX Metrics