<\/p>\n
FirstRand says the threat from the plethora of new competitors in the banking space is a topic \u201cthat fully occupies the minds of FirstRand\u2019s board and management team\u201d.<\/p>\n
In his annual letter to shareholders last month, chair Johan Burger says there is no doubt \u201cthat the number of new competitors challenging the \u2018big four\u2019 paradigm is significant, and it is changing the game for participants and consumers alike\u201d.<\/p>\n
Listen: Local banks offering great value into 2026<\/p>\n
He contends that while a narrative has persisted for many years among investors that the banking system in South Africa is a \u201ccosy oligopoly\u201d, in reality \u201cthere has never been anything \u2018cosy\u2019 about banking\u201d and competition between the incumbents has been \u201cfierce\u201d.<\/p>\n
\u201cTo both defend and attack in this new world requires agility and resilience if the group expects to continue to meet its core commitments to shareholders of outperformance, both in terms of growth and return on equity,\u201d he says.<\/p>\n
\nThe sector has faced a massive onslaught of new entrants in recent years with more to come.<\/p>\n<\/blockquote>\n
Apart from the runaway success of Capitec Bank, so far, TymeBank, Discovery Bank, Bank Zero and African Bank have all entered the space, with Old Mutual Bank being the most recent to launch a retail bank offering.<\/p>\n
Read:
How upstart Old Mutual Bank plans to take on Capitec
Did Old Mutual pick the exact wrong time to launch a bank?<\/p>\nCoupled with this has been Vodacom and MTN trying to position mobile money offerings of their own in the market. Both have met with very limited success.<\/p>\n
Retailer Shoprite has been at the edges with its free, no-frills Money Market Account. It has hinted it will make a full tilt at the mass market retail banking segment soon, while Pepkor has also confirmed that it has received approval to establish a banking presence. Add to this global fintech Revolut that has applied for a banking licence in the country.<\/p>\n
Read: Global fintech player Revolut applies for SA banking licence<\/p>\n
This is an infinitely more competitive market than just the six players from five or 10 years ago.<\/p>\n
\n\nADVERTISEMENT<\/p>\n
CONTINUE READING BELOW<\/p>\n<\/div>\n<\/div>\n
Burger argues that FirstRand, the country\u2019s largest banking group by market capitalisation, \u201cis facing up to this competition from a strong position given the quality of its customer-facing franchises and track record of innovation\u201d.<\/p>\n
Without naming Discovery Bank \u2013 but with an obvious reference to it \u2013 Burger says \u201cnew entrants have identified the high-quality profit pools where the group has built strong market share and have started to chip away at these\u201d.<\/p>\n
\nThis is the first time FirstRand has publicly \u2013 albeit not overtly or explicitly \u2013 acknowledged the threat from its former joint venture partner.<\/p>\n<\/blockquote>\n
The two groups have been fiercely fighting over a core group of as many as 300 000 original high-earning Discovery Card members who were part of the JV before Discovery bought that book and the right to exit the venture for R1.8 billion.<\/p>\n
Read:
Discovery\u2019s bank bet starts paying off, handsomely
Discovery Bank hit with admin sanctions, R3m penalty<\/p>\nAlthough perceived to be a bank targeting affluent customers, Discovery Bank has shared that it is attracting clients across all segments. This battle now extends across more segments than just wealthier customers.<\/p>\n
Burger says that while \u201cthe impact remains at the margin, vigilance is required, particularly with regard to areas where the new fintechs are looking to disintermediate the banks\u201d.<\/p>\n
He contends that the group has \u201cmany of the solutions required to compete, such\u00a0as a leading wallet offering [eWallet], and is fully focused on responding to the threats and opportunities that are emerging\u201d.<\/p>\n
FirstRand says it can address these threats by building, partnering or acquiring.<\/p>\n
Optasia stake<\/strong><\/p>\n
This, says Burger, is why the group acquired a 20.1% stake in fintech Optasia in October 2025 as part of that group\u2019s initial public offering.<\/p>\n
Listen\/read:
Optasia debuts on the JSE
AI fintech Optasia eyes Asian expansion
Bankers rake in up to R416m in Optasia JSE listing
No Optasia IPO pop \u2026 but there is value<\/p>\n\n\nADVERTISEMENT:<\/p>\n
CONTINUE READING BELOW<\/p>\n<\/div>\n<\/div>\n
Burger says \u201cas one of the world\u2019s largest AI-powered fintech platforms providing financial access to people across emerging markets, Optasia represents an exciting opportunity to leverage a proven fintech platform with a successful track record of solving the lending needs of underbanked or unbanked consumers who have had difficulty accessing traditional\u00a0credit products\u201d.<\/p>\n
\u201cIts ability to pre-score customers, process micro loans at scale and use mobile data sales as a credit collection mechanism is highly innovative and clearly meeting the needs of millions of customers in 38 countries across Africa, the Middle East and Asia.\u201d<\/p>\n
He says FirstRand looks \u201cforward to extracting value for our shareholders from this strategic investment\u201d.<\/p>\n
SA economic turnaround<\/strong><\/p>\n
Burger highlights that \u201cwhilst the country is currently benefiting to some degree from improved sentiment towards emerging markets, strong precious metal exports and low oil prices, considerable structural inefficiencies persist\u201d.<\/p>\n
\u201cReal GDP growth of around 1% is below population growth (which is around 1.5%), leaving per capita income negative,\u201d he says.<\/p>\n
\n\u201cHere the maths is brutal. Without faster growth, inequality and unemployment will\u00a0remain entrenched.\u201d<\/p>\n<\/blockquote>\n
The group has for more than two decades used its chair\u2019s letter in its annual report to weigh in on political issues.<\/p>\n
Burger describes the renewed coordination between National Treasury and the South African Reserve Bank (Sarb), which has seen the adoption of a lower inflation target, as \u201cthe most constructive alignment of macroeconomic policy since the joint response to the global financial crisis\u201d.<\/p>\n
\u201cThis shift creates a more predictable environment for investment by lowering risk premia, thus improving currency stability which should\u00a0eventually help ease the cost of capital for firms and households. It offers a genuine opportunity to rebuild confidence and place the economy on a firmer footing, and this is being recognised by international capital providers and the ratings agencies.\u201d<\/p>\n
Municipal dysfunction<\/strong><\/p>\n
\n\nADVERTISEMENT:<\/p>\n
CONTINUE READING BELOW<\/p>\n<\/p><\/div>\n<\/div>\n
Still, considerable challenges remain. Burger says the state of dysfunction in most of the country\u2019s municipalities is one of the biggest hindances to economic growth.<\/p>\n
\u201cMeasured by national municipal expenditure, only 19% received an unqualified audit opinion while 81% revealed varying degrees of mismanagement.<\/p>\n
\n\u201cThe people of South Africa deserve the delivery of basic services, which is fundamentally impossible if\u00a0only 19% of municipal financial resources are managed effectively.\u201d<\/p>\n<\/blockquote>\n
Problematically, \u201cJohannesburg \u2013 the country\u2019s economic hub \u2013 remains deeply dysfunctional, with service delivery and infrastructure collapsing\u201d.<\/p>\n
Read:
Operation Vulindlela 2.0: Ramaphosa targets municipal reform
The shocking decline of Joburg in 10 short years, in pictures<\/p>\n\u201cOperation Vulindlela\u2019s Phase II rightly focuses on local government, but the interplay between economic and judicial reform must now come into even sharper focus.<\/p>\n
\u201cAlthough many service delivery challenges are framed as complex coordination problems, it is also common knowledge that much of the county\u2019s failure to realise its\u00a0potential can be attributed to endemic corruption.<\/p>\n
\n\u201cWhen individuals waste other people\u2019s money for private gain, the economy underperforms and, crucially, confidence is lost,\u201d he says.<\/p>\n<\/blockquote>\n
\u201cThe government is learning how hard it is to restore that confidence.<\/p>\n
\u201cThe real tragedy lies in the human cost of generations of jobless youth and a population moving backwards in real GDP per capita terms.\u201d<\/p>\n
Read:
FirstRand takes stake in Jordaan-backed fintech Optasia
RMB CEO sees opportunity for big banks in rise of Africa fintech<\/p>\nFollow Moneyweb\u2019s in-depth finance and business news on WhatsApp here.<\/em><\/p>\n<\/p><\/div>\n