I live close to a small town, Prince Albert, as I have mentioned before (some would say endlessly).
We in the rural areas have an informal town-rating system. If you have a Pep, you have made it onto the first rung. We have one. Tick. We are what might be called a “one-Pep town”.
The next step up is a Spar. We have that too. And we have an Absa. In the next-sized town, you get all of those plus a Standard Bank and, possibly, if fortune has smiled upon the municipality, a Checkers. In our case, the nearest “level 2” town is Oudtshoorn.
The third level is where the glamour and sophistication of the medium-sized South African town really begin: a Woolies! Civilisation!
Yet of all these institutions, Pep is arguably the least obtrusive and the most significant. Working-class South Africa loves Pep. It generally does not trouble itself with ridiculous, expensive, difficult-to-wash products made from that ancient and impractical fabric, cotton. (This is not entirely true.) What Pep does sell is a great quantity of hardy, inexpensive and easily washable clothing made from the splendid modern miracles of the petrochemical industry: polyester, polyurethane and assorted substances whose names sound like contestants at a German spelling bee.
Until recently, snob that I am, I seldom went into our Pep. Then the Post Office imploded, and I discovered Paxi, the fabulously cheap and efficient parcel service that uses the Pep network to send packages around the country. It is one of those services that leaves you wondering how the private sector managed to make something so simple out of a task the state had spent years transforming into performance art.
And now Pep’s owner wants to give me a bank account.
Pepkor is preparing to launch PlusB in April, subject to final regulatory approval. It wants 1.8-million customers to use PlusB as their primary bank within five years and plans to combine a digital service with the counters of more than 6,500 stores. The total construction cost is expected to be no more than R920m.
This raises some obvious questions. Aren’t there already too many banks? Can a clothing retailer really take on an established and fabulously successful institution such as Capitec? And why, suddenly, does every second company in South Africa appear to want a banking licence?
The queue is becoming crowded. Discovery has a bank. Old Mutual has launched one. TymeBank has become GoTyme Bank and says it has 13-million South African customers. Bank Zero is being acquired by Lesaka, which wants to bolt banking onto its own payments and merchant network.
The answer is partly that banks make lots of money. This is generally considered a useful characteristic in a business.
PwC’s latest tally of South Africa’s major banks found that their combined headline earnings rose to R152.5bn in 2025, while their combined return on equity reached 20%. Capitec did even better: it reported headline earnings of R16.8bn, a return on equity of 31% and almost 26-million active clients for the year to February. At recent share prices, the bank is worth roughly R540bn on the stock market.
Those are numbers capable of attracting the attention of even the most committed seller of school uniforms.
But the more important answer is that a bank is no longer necessarily what we used to think a bank was.
The old bank was an imposing building with marble floors, a vault, frosted glass, a manager in a tie and a mysterious woman behind the enquiries counter who could sense that you had completed the wrong form before you even reached her.
The new bank is largely software, a regulatory licence, a payments connection, a risk model and an enormous database. The expensive physical plumbing has been shrinking while computing power, cloud systems, smartphones and digital payments have dramatically lowered the cost of doing the everyday work.
This does not mean that establishing a bank is easy. It means that the scarce assets have changed.
What matters now is not necessarily whether you possess a grand branch on Adderley Street. What matters is whether you already have customers, their trust, a way of reaching them cheaply, information about how they behave and some reason for them to open your app more than once a year.
Pepkor has all of those things.
It says it already has 32-million customer touchpoints every month. Its stores process millions of money transfers, cash deposits, withdrawals and bill payments. It has an existing lending operation, a rapidly growing handset-financing business, insurance products, 17-million loyalty members and a huge payments network in the informal economy through Flash.
In other words, Pepkor is not really starting a bank from scratch. It is taking a collection of activities that already look suspiciously like banking and putting a banking licence around them.
The licence changes the economics in a crucial way. At present, Pepkor lends its own or borrowed money to customers through its various credit businesses while paying banks and other providers to process parts of the transaction chain. With a bank, it can accept deposits, use those deposits to fund lending more cheaply, retain transaction fees within the group and observe a customer’s income and spending in real time.
Pepkor is certainly following the Capitec playbook: simple products, transparent prices, obsessive use of data, accessible distribution and a focus on customers who had been neglected or overcharged by the established banks. But copying a playbook is not the same as copying the institution that developed it.
Capitec has spent a quarter of a century refining its systems, culture and risk appetite. It now has 15.3-million app clients and has expanded beyond personal banking into insurance, telecommunications, business banking and a much wider range of credit products. Its success was not simply the result of buying some clever software. It was the result of thousands of small operational decisions made consistently over decades.
PlusB’s targets nevertheless reveal why Pepkor thinks the effort is worthwhile. It wants to build the bank for less than R1bn, reach 1.8-million primary customers, attract R8bn in deposits, advance R8bn in loans and generate a return on equity of more than 30% from its fifth year. Those are management forecasts rather than achieved results, naturally, but they are also an almost perfect explanation of the sudden outbreak of banks.
Build cheaply. Acquire customers you already know. Fund lending with deposits. Cross-sell everything. So, are there too many banks? Possibly there are too many bank accounts. But there are not necessarily too many effective competitors. We will see.
The big traditional banks remain immensely powerful and still dominate the country’s banking assets. But competition at the lower end has increased as technology has improved. The real battle is not to persuade someone to open an account in three minutes. It is to persuade them to reorganise their financial life around it.
Should PlusB succeed, our rural town-rating system may need revision. Prince Albert will still be a one-Pep town, but it could become a two-bank town without anybody laying a single brick.