Capitec's CFO: "You need to see your clients to see what they need"


Capitec CFO André du Plessis talks about loan desirability, motorbikes and the bank as his baby.

André du Plessis is a co-founder of Capitec, as well as its CFO. He talks to CFO South Africa about fast communication, understanding target markets, working with entrepreneurs and biking in exotic locations.
When André finalised Capitec’s investment in the international online lending platform Creamfinance, he was on his way from Panama to Alaska on his BMW 1200GS motorbike. “When I am on these trips, I work for one-and-a-half to two-and-a-half hours a day, which is mostly very productive,” says the veteran CFO, and co-founder of the bank that changed South Africa’s financial services landscape.

His take-work-on-holiday approach makes it possible to trek off for weeks – like his monster ride from Moscow to Vladivostok last year and the tour around Iceland this year – while playing a leading role in the fast-growing bank. “I like to ride my motorbike in different countries. Iceland is my 50th,” says André. “It opens my mind. I become more creative and forward-thinking.” 

It is no coincidence that André values creativity and forward-thinking, two pillars of the success of Capitec that has created access to financial services for millions of South Africans who didn’t have bank accounts before. “Simplicity and being customer-centric have been the cornerstones of this approach, while in the engine-room a different approach to pricing for risk has made us different to other banks.”

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It was this approach that landed Capitec in the crosshairs of Viceroy Research, a short sellers outfit that benefits from tumbling share prices. Viceroy accused Capitec of wrongdoing and said that the bank systematically rolls defaulting borrowers into longer-term loans. The share prices did indeed drop upon release of Viceroy’s report, but disaster was averted as the Reserve Bank quickly backed the Stellenbosch-headquartered bank.

When reflecting on the turbulent period, the CFO confesses it gave him a few extra grey hairs:

“When the Viceroy report came out, I received 17 questions from Bloomberg at 9am and answered all of them before the official release of the report at 10am. We managed to get a detailed SENS response out at 4pm and organised an international call for investors at the same time, where 741 callers dialed in. It was an unpleasant situation. The short seller didn’t have its facts right. I believe that our open communications and speed of response helped a lot in handling the situation.”

What also helped, says André, is that the bank has organised the reporting process in such a way that most information is available at all times and not much time is wasted on compiling reports. “Our year end is February and our audited results are issued a few weeks later in March already, which is evidence that we have all the information at our fingertips most of the time. It gives us the opportunity to carry on with our lives. In my opinion, too many CEOs and CFOs are concerning themselves with the previous year’s results. At Capitec, we are managing the business as we go along.”

The desire to communicate fast and in great detail is ingrained in Capitec’s DNA, says André. “We take everything seriously, whether it is competitors, regulators, shareholders or clients. If we get a vibe that shareholders do not like something, we immediately communicate with them. After the Viceroy report, we tested every single allegation, whether it was through our own internal audit or external parties – and we went back five years to check. What makes our business different is that we still manage it as if it is our baby. As executives, we are shareholders ourselves. We know the ins and outs of the bank.”

It is – of course – a plain fact that Capitec offers loans to people that other banks initially steered away from, which results in higher interest rates. The debate around this touches on the core of Capitec’s existence.

“After the Viceroy report came out, we also looked again at the desirability of what we offer,” says André. “There is a fine line between inclusion and exclusion. If we can price for the risk, we can offer products others don’t and make money available to people who traditionally did not have access to it. If we price for that, it makes the rates high and some people call that exorbitant. But if we don’t offer this product, people will still borrow money but they will go to much more unscrupulous, unregulated lenders.”

André feels that there is a “huge misunderstanding behind boardroom tables” that South Africa looks like Sandton, where “I can press a button and a cappuccino will arrive”. Five kilometres away lies Alexandra, where people live in entirely different circumstances, he notes. “Most executives and managers never go there, but at Capitec, we frequent the market very often. Whether you sell financial services, beer or food, you need to see your clients to know what they need.”

The need for the connection with the real world is often on André’s mind, he reveals. “On any given day, we leave our houses which are behind an electric fence, drive through a gate, sit in a car with music on, drive into a parking garage and arrive at our offices. That’s not the experience most people have. They get up early, catch a taxi or bus and work, for example, behind a conveyer belt. There they talk to each other the whole day and are part of a community. The way we live as business people, we are often quite lonely.”

Capitec’s four operating principles are simplicity, accessibility, affordability and personal service.

“We take the complexity that is part of banking behind the scenes. In most banks, the busiest counter is the enquiries counter. That is not an income-producing desk, but a place to sort out problems and address the expectation gap. We don’t have enquiries counters at all.

Accessibility relates to things like location and opening hours, like early in the day and Sundays, when people have time to visit a branch. When we have a bank near a bus station or taxi rank there is no point to only open at 9am.”

The affordability aspect of Capitec’s products has baffled international masters and PhD students, who have come out to South Africa to study the model, says André with a modest dose of pride. “We always strive to drive the cost of credit down, give a decent return on savings and apply a low transaction fee. When we started we charged R2 for a transaction, whereas all the traditional banks charged R25. Our international visitors couldn’t understand why we didn’t just charge R15, but that would not have fitted our philosophy.”

Recently, Capitec launched a funeral policy, once again stepping into a lucrative market where competitors charged high fees – and where very few other established financial services companies have trodden.

“I cannot tell you how much work we have done to really understand what it is that clients want and what they don’t like,” says André. “We could have also just copied what others did and offer a slightly better rate. But why do we exist? What makes us different? We wanted to offer the products that people need and can afford. Some traditional banks copy what we do and offer it for five cents less, it is laughable. We base our costing on required ROE. It is naive of others to think that everything is about price.”

Although Capitec’s executives earn competitive packages, they also make a point of promoting equality where possible. “We treat everybody exactly the same, whether it is staff or clients,” says André. “As board members, we stay in the same City Lodge or Town Lodge as any other Capitec staff member. We all sit in the back of the plane. Our branches are the same for everyone. Low income earners might consider them very luxurious, while wealthier people might just find them clean and functional, but it is the same for everyone.”

A bank’s deposits are dependent on the trust in the brand and André says it is crucial to keep in touch with clients in every possible way. “We have a team of people watching Twitter to monitor and respond, but we also interact in more traditional ways. While I might phone if I have an issue and my dad’s generation might go to a branch, younger people have no qualms about airing their frustrations on social media, in public. We need to respond, correct and improve and not just keep people quiet. That is why we discuss what comes out of Twitter during our management meetings.”

The fastest-growing group of Capitec employees consists of data analysts and business information specialist. Teams get measured every 15 minutes on their responsiveness and performance, bank statements can be analysed for loan affordability in seconds, using machine learning technology. The IT focus helps Capitec to stay ahead of others, André explains.

A consistent part of the way Capitec works is to check what competitors do and analyse what the bank can learn from it.  “If we see a new product launched in the newspaper, we phone in and ask questions. Often, staff in the branches of the other banks don’t even know about the products yet. I compare that with buying a car. I love everything with an engine in it. When I ask a Toyota dealer why their cars are better than Nissan’s, they often don’t know. They haven’t even been to a Nissan dealer for a test drive. To me that is strange. It is a mindset. You have to know what is out there.”

The acquisition of Creamfinance was a way for Capitec to learn from different markets and work with entrepreneurs who emulate the startup mentality and excitement that Capitec itself was born out of, according to the CFO. “What I can tell you is that South Africa’s unsecured lending is 15 years ahead of, for example Eastern Europe, in terms of regulation, use and managing the cost down. An independent review said that the existence of Capitec Bank saves consumers R20 billion per annum in bank charges.”

With a finance leader who says things like “Capitec is our baby”, it is hard to imagine him ever moving elsewhere and André acknowledges that the likelihood is very remote. “I want to download my knowledge that we have built up within Capitec and bring in new leaders that are equally passionate. Our top management of about 100 people regularly get together to share knowledge across this bank. Holidays are also excellent times for people to step into our shoes – and their performance during such times is part of the evaluation process.”

Whereas most CFOs struggle with another fine line, the one between work and family life, André testifies that it can be managed. “I often say to my team: be careful of a corporate. It will suck you in.” He says his father had always wanted to visit Russia, but never did. He recounts a story of a high-powered partner at Arthur Andersen, who started to cry and said he didn’t know his family that well. “I believe in sitting around the table daily to eat with everyone in the family and share,” says André. “Holidays are vital. I know my wife of 29 years and my three sons, who are all in their twenties, as well as they know me.”

Time outside and being active is another pillar of André’s approach to life, work and family. He often recharges his batteries, whether he is cycling the Cape Epic, parachuting or riding his motorbike in far-flung places like Iran and Tibet.

“If it’s cold, I am cold. If it’s hot, I am hot. If it’s windy, I feel the wind. That exposure to the elements is what keeps me fresh and creative.” 

This article originally appeared in the Q4 edition of CFO Magazine, available now in airport lounges.

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