South Africa’s banking sector, already undergoing rapid transformation, is poised for a significant shake-up as Pepkor, the nation’s largest clothing retailer and investment company linked to billionaire Christo Wiese, is in discussions to launch a zero-fee banking service. This ambitious plan aims to reach millions of lower-income South Africans who are often overlooked or underserved by large banks.

The proposed venture is still in talks, with Pepkor currently in discussions with Investec about a possible partnership. Although the outcome is not guaranteed, the project is expected to operate under the informal name “Pep Bank”. If a partnership is finalised, profits would likely be shared between the retailer and Investec. Investec, which traditionally caters to high-net-worth clients in South Africa and the UK, has been seeking new lines of income amid weak economic growth in South Africa. The move would broaden Investec’s exposure to mass-market retail banking.

Leveraging Retail Scale for Financial Inclusion

Pepkor’s primary advantage lies in its vast operational scale, boasting nearly 6,000 stores nationwide. The retailer, which operates chains including Pep and Ackermans, holds a dominant position in the discount and value segment. By opening banking counters or service points inside its existing stores, Pepkor would be able to expand its services quickly and at a relatively low cost. This model provides an easy entry point for millions of customers who already frequent these outlets for daily essentials.

The group also possesses years of extensive customer data collected through its retail operations. This data could be crucial in designing savings tools, small loans, and other basic financial services tailored specifically for lower-income households. Pepkor’s existing Fintech unit has already become a growing contributor to the company, with revenue rising 35 percent to R7.9 billion ($460.2 million) in the six months through March, representing 16 percent of total sales.

Despite the advanced discussions, Pepkor has stated that it currently has no formal bank partnership “with any bank,” and Investec also declined to comment on the negotiations.

Intensifying Competition in the Low-Cost Market

The entry of Pep Bank would heighten competition in South Africa’s low-cost banking segment, a market traditionally dominated by Capitec Bank. Capitec, which launched in 2001, successfully appealed to working-class and unbanked South Africans by offering simple, low-cost products, longer operating hours, and streamlined services. Today, Capitec is the country’s largest lender by customer numbers, serving around 25 million clients, which is more than half of South Africa’s adult population. Capitec recently reported a record profit, with headline earnings increasing 26% to R8 billion for the six months ended August 2025.

However, the market for affordable banking is becoming increasingly crowded. Other retailers, such as Shoprite Holdings, are already using loyalty data to offer financial services. Shoprite’s Money Market Account, for example, is a fully-fledged, transactional bank account—the first offered by a South African retailer—that charges a flat R5 fee for cash withdrawals and no monthly or other transaction fees, positioning it as the lowest cost entry-level bank account on the market. Shoprite’s CEO, Pieter Engelbrecht, has confirmed the company’s intention to compete more aggressively in financial services, noting that their account will be the only zero-cost bank account in the country.

Furthermore, digital-native banks like TymeBank, backed by Patrice Motsepe, have also gained significant traction, successfully deploying banking kiosks in retail chains. Old Mutual is also preparing to challenge Capitec with OM Bank, targeting the upper mass market and lower affluent customers.

This influx of new entrants, particularly those leveraging retail footprints like Pepkor and Shoprite, comes at a time when traditional banks—Absa, Standard Bank, FNB, and Nedbank—are under pressure to reinvent their operations and customer innovation strategies, moving away from models that previously overlooked large segments of the population. The interest from retailers stems from years of slow change from established banks, creating an opportunity for affordable, accessible digital services.

The proposed Pep Bank zero-fee model, offered directly inside retail stores, is a direct challenge to this intensifying landscape, appealing specifically to customers who value convenience and are already loyal to the Pep brand. The success of these retail-backed fintech initiatives underscores the ongoing shift toward financial inclusion for the roughly one-sixth of South Africans who remain unbanked.