Standard Bank Group CEO Sim Tshabalala says consolidation in a sector is inevitable, with smaller industry players ripe for takeover, with fintech players increasingly becoming a factor reshaping the key sector, particularly personal banking.
Tshabalala was speaking at the Semafor World Economy Summit, held in Washington.
“There is bound to be consolidation. We are starting to see that in South Africa. We have six large banks and a number of Tier 2 banks, and they are already showing signs of advanced challenges, if I may put it that way. There is going to be consolidation, no question about it,” he said.
Tier 2 banks in South Africa are smaller, specialised or niche financial institutions compared to the big six banks: Absa, Standard Bank, Investec, FirstRand, Nedbank and Capitec. Some of the Tier 2 banks include Bidvest Bank, African Bank, specialist lenders and digital bankers.
The country has about 14 commercial banks, three mutual banks, five co-operative banks and 12 local branches of foreign banks. However, the industry is still heavily concentrated, with the top six banks controlling about 90% of the sector’s assets.
Standard Bank has the largest share, accounting for 25% of the industry’s assets, followed by FirstRand at 22%, Absa at 22% and Nedbank at 16%. Investec holds 7% of the sector’s assets and Capitec 3%.
The big banks have particularly taken an interest in beefing up their fintech proposition as consumer banking needs evolve and value-added services become key.
Nedbank last year acquired iKhokha, one of Africa’s fastest-growing fintech companies, for R1.65bn in one of the biggest fintech deals of the year. Durban-based iKhokha was co-founded by Matt Putman, Ramsay Daly and Clive Putman, and since its establishment in 2016, it has redefined the way SMEs do business through mobile innovation.
Capitec last year also moved to acquire fintech player Walletdoc as part of its strategy to offer leading secure payment acceptance to Capitec Business clients and simpler, more affordable e-commerce solutions to Capitec personal banking clients.
There has also been consolidation among fintechs themselves. Lesaka Technologies bought Bank Zero for R1.1bn in a transaction that will see it launch a suite of foreign currency products that will allow it to play in the competitive cross-border remittances market. Lesaka also bought fintech operator Adumo for R1.6bn in 2024.
It’s not only in South Africa where consolidation in the banking sector is under way, with Kenya and Nigeria also undergoing a wave of corporate activity.
Nedbank earlier this year announced the capture of a majority stake in Kenyan bank NCBA in a deal worth R13.9bn. Standard Bank was also said to be after NCBA, to strengthen its position in Kenya, where it is underweight.
“In countries where you have a proliferation of banks, there comes a time when there is consolidation because of lack of discipline in large parts of the financial services sector,” Tshabalala said. “I do envision a situation where there would be consolidation and partnerships between incumbents and fintechs.”
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