Competition, Barriers to Entry and Inclusive Growth in Retail Banking: Capitec Case Study
Date
2016-01-15
Authors
Makhaya, Trudi
Nhundu, Nicholas
Journal Title
Journal ISSN
Volume Title
Publisher
LINK Centre, University of the Witwatersrand (Wits), Johannesburg
Abstract
This case study examines barriers to entry in retail banking in South Africa, informed
by Capitec’s experiences as an entrant in this concentrated and highly regulated
sector. Capitec’s entry and growth in transactional banking sparked a competitive
response from incumbents. Across all four incumbent banks, the fees for low-cost
accounts have come down in nominal terms. It is unlikely that these effects would
have occurred if the status quo had continued without a disruptive entrant, or if
Capitec had been acquired by one of the incumbents early on. Capitec overcame
barriers to entry including customers’ reluctance to switch, complex regulation, and
the largely self-regulated payments system, in order to grow, in a sector populated by
incumbents with some market power. The case study considers measures that could
lower barriers for future entrants.
Description
Keywords
Citation
Makhaya, T., & Nhundu, N. (2016). Competition, barriers to entry and inclusive growth in retail banking: Capitec case study.The African Journal of Information and Communication (AJIC), 17, 111-137. https://doi.org/10.23962/10539/21626