Challenger banks are not making headway in attracting customer deposits — a vital part of the banking system, ensuring that banks remain stable, liquid and able to provide services to clients — with the exception of Discovery Bank and, to some extent, GoTyme.
This is according to an analysis by Nedbank, published in its annual report on Friday.
The lender, which has about 16% of the industry’s assets behind Standard Bank, FirstRand and Absa, said newcomers such as Discovery Bank and GoTyme Bank have intensified competition in South African retail banking, with insurers and telecoms also targeting transactional services, insurance and deposits.
However, it said many newcomers were not making headway in loans and deposits.
“New entrants have not made any significant inroads apart from Discovery Bank, which targets a niche middle- to upper-end consumer and now has a 0.5% share of retail lending and a 1.3% share of retail deposits,” Nedbank said.
Launched in 2019, Discovery Bank recently reached a milestone, turning its first normalised operating profit of R75m for the six months ended December 2025, marking a successful pivot from a R145m loss in the prior period.
The lender has outlined its ambitions to win market share in the competitive home loan market.
Nedbank, which has more than R1.5-trillion in assets, acknowledged that the presence of new entrants has helped keep general bank fee increases below inflation.
South Africa’s banking industry has seen a flurry of new players over the past decade, including OM Bank, Old Mutual’s banking proposition.
Retail giant Pepkor is also looking to get into the industry, marshalling its more than 5,000 branch network and 10-million digital clients.
The biggest success in the industry over the past two decades has been Capitec, which has grown to amass 25-million clients and become the country’s largest digital bank, with 12-million clients interacting with its digital offering.
It is Capitec’s success in personal banking that has made the industry take notice as it looks to replicate this in business banking, where it is looking to disrupt small business lending.
“Investors are particularly focused on the possibility that Capitec may achieve similar success in the SME segment as it has in the retail sector, which could have implications for the market,” Nedbank said.
Capitec is expected to give an update on the performance of business banking when it releases its annual results on Wednesday.
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