South Africa’s banking landscape is heating up as OM Bank and Pep Bank prepare to take on Capitec by offering affordable, accessible, and tech-driven financial services aimed at the country’s lower- and middle-income segments. This week, reports emerged that Pepkor Holdings Ltd., a retail giant known for its dominance in the discount and value segment, is planning to partner with Investec to launch a new banking venture.
The proposed bank, expected to be branded as “Pep Bank,” will offer zero-fee banking services and leverage Pepkor’s extensive retail footprint of 6,000 stores nationwide to reach millions of underserved customers.
Pepkor’s retail portfolio includes household names such as PEP, Ackermans, Dunns, Shoe City, and Tekkie Town, giving it unparalleled access to South Africa’s lower-income consumer base. By embedding banking services within existing stores, Pep Bank can roll out branches quickly and attract customers who already frequent its discount outlets. Additionally, Pepkor plans to use its rich trove of customer data to design tailored financial products, enhancing relevance and trust.
While discussions with Investec are ongoing and no formal agreement has been announced, sources suggest that profits from the venture would be shared between Pepkor and Investec, which traditionally serves high-net-worth individuals but is now seeking new growth avenues.
Pep Bank will enter a fiercely competitive space dominated by Capitec Bank, South Africa’s largest bank by customer numbers, and TymeBank, backed by billionaire Patrice Motsepe. TymeBank has successfully deployed banking kiosks in retail chains such as Pick n Pay, Boxer, and TFG, while Capitec has built its reputation on simplicity and affordability.
Capitec’s breakthrough came from offering a single, all-in-one transactional and savings account, a stark contrast to traditional banks’ complex, tiered products with hidden fees. Its low cost-to-income ratio enabled it to maintain minimal fees, attracting price-sensitive customers and fueling explosive growth to 25 million clients.
New entrants like Pep Bank and TymeBank are adopting similar strategies—low-cost, transparent banking—while leveraging retail partnerships to scale quickly.
Meanwhile, OM Bank, a subsidiary of Old Mutual, has unveiled an ambitious plan to challenge Capitec and other incumbents in the mass market. The bank aims to combine insurance and banking services, leveraging Old Mutual’s seven million-strong insurance client base and its existing Money Account product.
OM Bank targets South Africans earning between R8,000 and R80,000 per month, positioning itself squarely against Capitec. To succeed, OM Bank estimates it needs 2.8 million clients to break even by the 2028 financial year, despite projecting annual losses of R1.1 billion to R1.3 billion until then.
The bank is off to a strong start, onboarding 5,000 customers daily and reporting 140,000 clients just three months after launch. This rapid growth is driven by converting existing Old Mutual Finance customers and Money Account holders. OM Bank also benefits from Old Mutual Finance’s R15.5 billion loan book and 346 branches, giving it a significant head start over other new entrants.
CEO Clarence Nethengwe highlighted the bank’s digital edge, noting that its app generates 24 times more interactions per client per year compared to competitors. This creates opportunities for cross-selling insurance and investment products, reinforcing Old Mutual’s integrated financial services model.
Both Pep Bank and OM Bank are targeting the mass market segment, which remains underserved by traditional banks. Roughly one-sixth of South Africans are unbanked, creating a lucrative opportunity for innovative, low-cost banking solutions.
As competition intensifies, Capitec faces its most serious challenge yet. With Pepkor’s retail muscle and Old Mutual’s insurance expertise entering the fray, South Africa’s banking sector is poised for a major shake-up—one that could redefine financial inclusion for millions.
