Capitec made sure to understand the impact of Covid-19 on its clients, and to act accordingly.
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As South Africa started experiencing the impact of Covid-19, banks across the country had to respond to the financial distress of clients who couldn’t pay back their bonds or credit.
Capitec was amongst those that had to drastically adapt. Capitec offers banking services across all income groups of South Africa and has always put the needs of its clients at the forefront of its strategy. Although most people were affected, low-income earners were especially hard hit by the onslaught of Covid-19, CFO André du Plessis says Capitec had to adapt even further to support them.
“If we look after our clients, our clients will look after the shareholders,” André says. “We needed to really understand what the impact of the pandemic would be on our clients and how we could help to mitigate this impact.”
The biggest impact of Covid-19 on the bank’s clients was salary cuts due to the hard lockdown. Many businesses ceased operations for more than five months or closed their doors altogether. “When people get paid less, or not at all, like we’ve seen happen during the pandemic, it’s disastrous for their spending patterns,” says André. This subsequently impacts the rest of the economy as well.
In addition, for some of those who were able to work from home, there were associated costs in setting up connectivity and a home workspace. People who used to get free lunch at their place of work also had to start covering that cost themselves. For all these and other reasons, Capitec decided to do what they could to help ease the burden of additional costs.
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Capitec reimbursed clients who requested a three-month payment holiday because of Covid-19 and diligently resumed their repayments thereafter, the full amount of interest for those three months. The bank also decreased some of its fees, and the lower end of the market was especially assisted as a result during the lockdown period.
“We really tried to understand how the pandemic affected our clients. Only 50 percent of our branches were open,” André says. The other client facing personnel were used to double-up on our call centres. We specifically used this time to convince clients to transact digitally instead of using cash. That said, Capitec stopped charging clients for cash withdrawals who were receiving grants and, when clients withdrew cash from other banks, they didn’t have to pay any additional fees.
“We didn’t want to benefit from people’s difficulties as a result of Covid-19,” André says.
Adopting a more digital approach to banking
As Covid-19 sped up digital adoption for companies around the world, Capitec used the opportunity to market to its clients to adopt a more digital approach, i.e. swipe, dip, tap or do app and internet payments instead of withdrawing cash.
Not only did the bank increase its digital offerings to customers, giving them the easy and cheaper option of banking from anywhere or any time, it also moved its communication system to a digital platform. Now its internal communications system is set up in a way that allows all incoming and outgoing calls to be redirected anywhere in the company. When an employee logs into the system, whether the person is at the call centre, head office, a branch, or even at home, the call is redirected to where they are.
This system also enables Capitec’s branches that aren’t busy to take overflow calls from the call centres, which has improved the bank’s efficiency significantly.
Not the end of brick and mortar banks yet
Despite the bank clients’ increased adoption of digital and the bank’s working-from-home initiatives, André says that Capitec isn’t looking to close down it’s brick and mortar branches just yet.
Even though Capitec also onboards new clients remotely, it still gets seven to eight million people frequenting its branches monthly. “The emphasis of our branches has moved from transactions, lending and onboarding to mostly onboarding, receiving advice and granting of lending products,” André says.
Incurring a loss
The increased credit impairments, decreased transaction volumes and people not having any disposable income due to Covid-19 resulted in Capitec incurring a loss during its first quarter from March to May 2020. “It was the first time ever in our 20-year history that we made a loss for a quarter,” André says.
Like many other companies, Capitec also had to incur a lot of additional costs during 2020. However, André believes that they were a small price to pay to avoid the potential damage that the pandemic could have caused. He explains that, in some cases, the costs proved to be beneficial for the company. “The fact that we moved from cash-based transactions to digital transactions is a permanent benefit for the company and our clients.”
Capitec’s digital volumes continue to increase, as opposed to cash and transactions in branches, and the bank has since managed to increase its profit by 18 percent for the period 1 September 2020 to 28 February 2021, compared to the second half of its 2020 financial year.
André explains that Capitec’s liquidity has also increased significantly, with a record year of growth in its deposits as companies didn’t invest much during 2020 and people didn’t spend as much either.
“All in all, thus far, we’ve actually recovered,” André says.
A family man’s paradise
André explains that what he found personally rewarding during lockdown was the fact that he could spend a lot more time with his wife and that, while people were reportedly gaining weight during lockdown, he had lost quite a few kilograms by making a conscious effort to eat less and exercise. He always tries to spend a lot of time with his children but during the December 2020 break he and his wife had to spend the holiday alone since all his children got Covid-19. “Fortunately, Elsabé and I escaped it thus far,” says André. His big wish is to indulge in his favourite hobby once again.
André is a motorcycling enthusiast and was planning to do a trip across South America with his motorcycle but had to put his plans on hold due to Covid-19. “I really missed out over the last 18 months as a result of the lockdown restrictions,” he says. He started riding his motorcycle across the world many years ago and has driven through 58 countries thus far. As for now he stays close to home, where he knows things are safe.
Read more: André du Plessis interview