While competition in the highly concentrated South African banking industry will provide consumers with more choice, will these newcomers make significant inroads into the market share of the dominant banks?

Patrice Rassou, head of equities at Sanlam Investments, believes that the success of Capitec has already proven that the so-called “Big Four” are vulnerable.

“Capitec came from nowhere 10 years ago to now having eight million clients. It is a game-changer and has alerted other potential competitors that it is possible to challenge the dominant banks.”

Julia Ahlfeldt, who consults on consumer experience to the financial industry, says everyone has a horror story about their bank which has slowly undercut the trust in the dominant players. “It can be a pain to switch banks, but the legacy brands have eroded customer loyalty to the point where I believe the market is ripe for disruption,” says Ahlfeldt who also highlights the success of Capitec, which unlike the other four banks, has very high customer satisfaction.

“Research shows that consumers are more likely to remember negative experiences than positive ones – and they’re also more likely to tell others about it. The three new banks, on the other hand, will be starting off on a clean slate,” says Ahlfeldt, adding the strength of the newcomers is that they will not be stuck with legacy systems where products are not integrated for a seamless customer experience.

She highlights her own experience with her bank when she recently went to apply for vehicle finance. Despite having banked with them for years, they knew nothing about her because there is no integration between personal banking and vehicle finance.

“My word of caution to SA’s incoming challenger brands would be to ensure that they can live up to their promises,” says Ahlfeldt.

Khulekani Mathe, head of financial inclusion at the Banking Association of South Africa, says the new banks are critical to the development of the financial sector. “While customers complain about failures of the big four to deliver, it is unrealistic to expect them to meet the needs of every South African, especially as they are very heavily regulated.”

He says the Dedicated Banks Bill, which encourages different banking structures, has meant that new banks can come to market and target specific sectors of the population, rather than trying to be all things to all people. By focusing on specific markets and requiring less regulation, they can create products appropriate for their customer base.