Shoprite and Investec Bank agreed in principle to form a banking alliance, the companies announced on Monday.
The proposed deal would let South Africa’s largest grocery retailer grow its fintech and transactional banking services. Shoprite would not need to set up a separate bank.
Shoprite CEO Pieter Engelbrecht said the retailer’s aim was to make financial services more affordable and accessible to its customers.
Investec Group CEO Fani Titi said the bank could reach customers beyond its traditional private-client base. Titi said the deal would also increase Investec’s part in South Africa’s payments system and retail deposit market.
The expanded transactional account will include a debit card. The card is meant to give customers more flexibility when they make everyday payments.
The arrangement is non-exclusive. It does not replace Shoprite’s existing banking relationships.
Keagan Higgins, an investment analyst at Anchor Capital, assessed the deal in a Moneyweb column. Higgins wrote that Shoprite offered Investec a route into a much broader customer market.
Higgins pointed to Shoprite’s store network and its frequent contact with millions of customers. Building that alone would take Investec considerable time and investment, Higgins said.
Shoprite is already a corporate client of Investec, according to Higgins. That gives the bank an established relationship to build on.
Higgins said Investec had been working to grow its retail funding and rely less on wholesale funding. Shoprite could give the bank another channel to attract those deposits.
The analyst warned that a high number of transactions did not always mean a large or stable deposit base.
“Customers may use an account regularly while keeping relatively little money in it,” Higgins wrote in Moneyweb.
The funding benefit would depend on average balances and how stable they were, Higgins said. It would also depend on what Investec paid for that funding.
Higgins wrote that the deal let Shoprite expand financial services while keeping control of the customer relationship. Shoprite brings its brand, its stores and regular contact with shoppers. Investec provides the banking skills and systems behind the account.
The debit card should make the account handier for everyday spending outside Shoprite’s own stores, Higgins said. That could lead to more regular use and more income from financial services.
Higgins said turning shoppers into regular banking customers would take more than opening accounts. Competitive fees and a convenient, reliable service would be important.
“Opening an account is a much lower hurdle than getting someone to pay their salary into it,” Higgins wrote.
Anchor Capital sees the partnership as a positive strategic development for both groups, according to Higgins. Regular transactions and salary deposits would be encouraging signs, the analyst wrote.
The proposed arrangement remains subject to regulatory approval.
Source: this article is based on reporting by Moneyweb. Image: Moneyweb. Written with the help of AI and published by the Tzaneen Voice Business desk. See our Editorial Standards.
Anelisa Nkuna covers business and money news for Tzaneen Voice. Anelisa reports on the rand, fuel prices, interest rates, jobs, Eskom, Transnet, farming and company results. The aim is simple: explain what the numbers mean for household budgets, small businesses and workers in South Africa.