Discovery and TymeBank take market share, but who’s losing?

There is no doubt that Capitec has had a profound impact on the banking sector in the last decade – but in the past five years we have seen massive inroads from TymeBank in the mass market and Discovery Bank, particularly in more affluent segments.

TymeBank, which launched in 2019, has amassed 9.5 million customers and achieved operational breakeven in December 2023.

Discovery Bank crossed the one million client mark a few months back, and those customers have more than 2.3 million accounts. It, too, has reached breakeven and ought to report profits going forward.

But numbers of customers and transactional activity is but one set of metrics.

It is not difficult to have a huge number of customers generating revenue who are not profitable (ask the big four banks about their Mzansi account adventures).

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Lending is where the money is and it’s no surprise that this is one of Discovery Bank’s core propositions. TymeBank has benefitted from group synergies with (effective shareholder) Sanlam and Crossfin’s Retail Capital is being reversed into the bank. By the end of June, it had advanced R1.8 billion in credit to its merchants.

ALSO READ: TymeBank becomes Africa’s first digital bank to reach profitability

Where the Big 4 need to brace for impact

There are three main areas in which the impact of competitors will be seen across the (traditional) big four full-service banks:

1. Credit cards;
2. Other loans and advances (primarily personal loans); and
3. Deposits.

The impact of challenger banks (including Capitec, to the extent it can be called that) on the rest of the market has been material in the past five years.

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Credit cards

According to BA900 data from the South African Reserve Bank (Sarb) shared by Standard Bank, the card market share of other providers outside of Standard, Absa, FirstRand and Nedbank has doubled from 8% of advances in 2019 to 16% in 2024.

Household credit card debt advances sits at around R164 billion, according to the Sarb. Capitec has more than R10.5 billion of this at the end of August, while Discovery Bank has card advances of R6.2 billion (Investec is relatively tiny at R2 billion). Together, though, these three banks account for nearly 12% of the market.

Nedbank’s card market share is now below 10% for the first time in over a decade.

FirstRand has fought hard to maintain its market leadership in card. It built this lead between 2014 and 2019, during which it increased its share of advances by nearly 10 percentage points – from 17.9% to 27.4%.

At the time of the sale to Discovery, the card JV had 300 000 active clients and this was the main building block for its banking unit. FNB (and RMB) had to fight to keep every single one of those customers, and to ensure it didn’t lose too many of its own customers to Discovery.

Both fears were valid – more than half of Discovery Bank’s new customers are new to Discovery; they don’t already hold another product with the group.

FirstRand’s market share is slightly lower now than it was in 2019, but it has held up well.

It is not only Nedbank that has lost significant card market share. Standard Bank’s share of the market has declined from nearly 26% (at its peak in 2021) to 22% now.

With other loans and advances (which includes personal loans but also commercial property finance), three of the ‘old’ big four each hold between a 20% and 22% share of advances, while the other banks hold another nearly 21%.

Only Nedbank is below 20%, with market share based on loans of 16% in 2024 (likely due to it pulling back from commercial property lending). This is down from closer to 18% in 2019.

FirstRand has grown aggressively since 2020.

A big chunk of the ‘other’ market is Capitec, which has gross advances (across term loans and access facilities) of R75 billion.

ALSO READ: Capitec to start easing credit-granting criteria

Household deposits

On household deposits, the market share of three banks (Standard Bank, Absa and FirstRand) are between 20% and 23%, when one takes into account cheque, savings, on-demand and one-to-30-day notice accounts.

Nedbank’s market share has declined from 16% to 13.3% across the last five years.

Investec continues to grow its share (now close to 11%) while Capitec’s is stable at 9%.

The share of ‘other’ is up at 3% from 2% in 2019.

Discovery Bank has attracted total deposits of R18.5 billion (as at June), while TymeBank has deposits of R6.5 billion.

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Residential mortgages

The shares across residential mortgages have been relatively stable in the last five years, which isn’t startling given the long-term nature of home loans.

SA Home Loans is 50% owned by Standard Bank, which helps explain its 34% market share.

With SA Home Loans’s new partnerships with Capitec Bank and Discovery Bank – under which it will underwrite mortgages to clients of those banks – expect that number to trend upwards.

This article was republished from Moneyweb. Read the original here.