Pepkor’s financial services and fintech operations are growing far faster than its retail business, strengthening the case for the group’s planned move into banking. In a voluntary trading update for the three months ending in December, the Pep and Ackermans owner said revenue from its fintech segment jumped 25.4% to R4.8bn, while financial services revenue surged 47.6% to R2.4bn. In contrast, group retail sales growth was modest, with like-for-like sales up 3%.
The numbers show that credit, payments, insurance and digital services are becoming a central part of Pepkor’s business, not just an add-on to its shops. Credit sales continued to grow, rising 26.9% and increasing their share of total group sales to 18%, from 16% a year ago. Pepkor said it continues to expand retail credit while closely monitoring approvals, collections and bad debts to protect the quality of its loan book.
Demand for fintech products also remained high. FoneYam, which rents out cellular devices, grew its active customer base to 2.3-million, almost double the level a year ago. Abacus Insurance doubled revenue as it expanded insurance products sold through Pepkor’s retail brands.
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Pepkor announced last year that it plans to launch a new bank after receiving Prudential Authority approval. The bank will build on Pepkor’s large shop network, Cloudbadger technology platform and existing financial services such as Capfin and Flash. The group aims to offer simple, affordable banking products to its customer base, with the first products expected to launch this year.
One area Pepkor has also identified as a growth vector for the next few years is South Africa’s vast informal sector. Pepkor’s early investment in fintech group Flash 17 years ago has paid off, with the firm now available to about 175,000 informal traders around the country. Flash collaborates with top brands and businesses to offer quality products and services to the informal sector, and with cash still king in this segment, the company has been gaining traction in South Africa.
Flash leverages connectivity and smartphone access to extend reach beyond traditional retail through a technology-driven business-to-business and business-to-customer business focused on empowering informal market traders with smart technology solutions. “The informal market continues to show high levels of activity and growth, playing a significant role in South Africa’s economic landscape. The Flash business increased revenue by 9.5% to R2.5bn for the quarter,” the group said.
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