Pepkor, a JSE-listed retailer renowned for quality clothing at discounted prices, is a big player in South Africa’s FinTech ecosystem.
FinTech is revolutionising how customer needs are met by enhancing accessibility, reducing costs, and providing personalised financial solutions. Through digital banking and online payment systems, customers can conduct transactions conveniently from anywhere, while automated services and robo-advisors offer efficient, low-cost financial management.
FinTech also promotes financial inclusion by extending microloans and mobile banking to underserved populations. Additionally, the use of data analytics allows for tailored financial products, and advanced security measures, such as blockchain and fraud detection technologies, to ensure safe transactions. These innovations collectively improve the overall customer experience, making financial services more accessible, affordable, and secure.
Pepkor’s revenue from the FinTech segment increased by 24.5% to R5.8 billion in the six months to end-March 2024, driven by strong growth in Flash and Financial services businesses.
“As a group, Pepkor has unrivalled customer acquisition capability through its retail brands and store network. This enables us to solve customer needs which go far beyond baby and school wear, such as affordable connectivity and smartphones,” Pepkor CEO Pieter Erasmus said.
“We have been deliberate in accelerating strategic execution in these areas, which weighs on profitability in the short term.”
The FinTech segment continues to increase its contribution to group revenue, contributing 13% in the current period versus 12% in the same period last year.
Cellular
The group sells seven out of 10 prepaid smartphones in South Africa (according to GfK1 data) and 5.6 million cellular handsets were sold during the period, 58% of which were smartphones.
Private label cellular handsets such as Stylo and Premio contribute 18% to the product mix and achieve higher gross profit margins.
FoneYam, the newly developed cellular handset rental product designed to make smartphones affordable for customers, was rolled out to 1 000 stores by the end of March 2024, with 202 000 handsets sold.
The monthly customer activation rate reached 60 000 handsets and continues to accelerate. The FoneYam cellular rental book amounts to R258 million (gross) with an initial provision level of 16%.
Cellular ongoing revenue earned from mobile network operators increased by 8.8% to R1 billion.
Insurance
During the year, affordable insurance products provided to customers were enabled through Abacus.
Abacus increased the number of written insurance policies by 96% to 650 000. Credit life was rolled out in Capfin with 87% coverage of Capfin loans and a 95% take-up rate on new loans.
Parcel cover embedded in PAXI covered 2.7 million parcels during the period.
The group continues to leverage its insurance capabilities, capitalising on its trusted retail brands, store network, and ability to collect premiums.
Lending
Capfin’s loan base has expanded to 318 000 loans and includes a shift to longer term loans. The gross unsecured credit loan book increased to R3.1 billion versus R2.5 billion in the same period in 2023 with a 18% provision level.
Flash performed well and increased profitability by more than 20% for the period. Total throughput (virtual turnover based on face value of products sold) increased by 27.6% to R23.3 billion for the period.
The average throughput across the informal market trader base of 165 000 increased by 25.7%.
Credit interoperability, which allows customers to use their A+ credit accounts in various Pepkor retail brands, expanded to 2.5 million A+ accounts, with 552 000 accounts opened during the period.
“This builds the group’s share of the retail credit market, although credit still remains a relatively slow sales enabler at 13% of total sales (10% last year). The remaining 87% of sales is still transacted in cash. Credit is extended on a conservative and sensible basis and the group has seen lower approval rates with lower account limits allocated to customers.”
Digital channels
The +more customer value platform was successfully launched in April 2024 across more than 15 Pepkor retail brands, covering more than 5 000 stores.
“Despite its infancy, +more is already expanding the group’s known customer base, with 24% of current
registrations coming from customers who were previously unknown to the group.”
“Our FinTech strategy, enabled by the group’s retail and customer acquisition capability, is gaining momentum and showing early signs of success as we focus on solving customer needs and providing them with access to affordable products and services such as credit, connectivity, smartphones and insurance.,” says Erasmus.
