Hugo Scott-Gall: It is with great pleasure that I welcome a true visionary in the banking industry, Gerrie Fourie, the CEO of Capitec Bank. Gerrie embarked on his journey with Capitec in 2000, at a time when the company had fewer than 10 employees. His appointment as CEO in 2014 marked the beginning of a transformative era during which he played a pivotal role in establishing Capitec as South Africa’s leading digital bank. Under his leadership, the client base expanded five-fold from 5 million to almost 25 million clients. I’m honored to have him here to reflect on his extraordinary career. Gerrie, welcome to the show.
Gerrie Fourie: Thank you. Nice to be here, Hugo.
Hugo Scott-Gall: So, could you tell us not just about Capitec, but about Capitec’s growth which has been astonishing really, for want of a better word.
Gerrie Fourie: Yeah, it’s a long story. We started in 2000. We saw a big gap in personal banking. We believe banking is too complex and is not transparent. Branches are operating from 9 to 3:30 during the day, so it’s not accessible. So, what we went out and said, if you look at the South African market in particular, and people that has not got maybe all the financial education or financial knowledge that they need to have, we need to make banking as simplistic and transparent as possible. Then we started saying but how do we do it? And we actually looked at our fundamentals, which is affordability, accessibility, simplicity and service. From there we started to really build the bank.
I think our first 12 years was really about establishing a brand because you don’t establish a brand overnight. It’s something you build over time. And if you build a brand and it’s all about consistency, consistency, consistency because that builds trust. And we built that for the first 12 years. And we were starting to get bigger. I think that’s where the word culture comes in because we realized how important culture is going to be. Because you need to build an organization that becomes 2-300 years old. And we spent quite a long of time on our culture which is client obsessed people and delivery.
But that also brought in a new dimension because there were other small business operating, he is obsessed with his client, he’s got a massive amount of energy, and he takes ownership, he takes decisions. And we said that is actually a CEO. So, we said that every single person must be a CEO of the company, and take ownership and accountability. So, it’s not only myself as the CEO, but everyone’s a CEO and really takes ownership and takes decisions and challenges what needs to be done and what is best for our clients. I think, to an extent, the whole DNA of Capitec is just the ownership of all our people, accountability of all our people, and everyone is very focused on the client and is client obsessed.
So, it’s a journey. To add to that is when we diversify and said but we will need to be a one-stop-shop. We can’t only do banking. That’s where we actually looked at our value-added services, insurance, business banking, etc., etc., adding that to our portfolio. So, it’s a long journey. But I think the culture in CEO is critical in our success.
Hugo Scott-Gall: Were you a bunch of entrepreneurs looking to do something entrepreneurial and you settled on banking? Or you had knowledge of the banking industry and said, “Look, there’s something that needs disrupting here. There’s a bad product that needs to be replaced by a good product?” So, did you start with, “Hey, the banking industry’s upside down, needs to change?” Or was it, “We’re a bunch of entrepreneurial guys, where should we go and disrupt?”
Gerrie Fourie: No, it was more Michiel le Roux was the CEO of Boland Bank and Riaan took over for him, become a chairman. They looked at banking and said, “But banking is too complex and hasn’t delivered on the needs of the clients.” When Michiel found me and asked me to join, his whole vision was how do we disrupt banking? How do we do banking differently? How do we make certain that there’s value for our clients? So, I think the important thing is he’s got that vision. I think he put a very strong team together. And with that vision and strong team and our ability to be agile and really go up and do things differently, I think that was the result of what Capitec is today.
Hugo Scott-Gall: So, you’re clearly a very product driven, client driven business, which is great. But you sort of have people find and understand that you’ve got a good product and it’s better. How hard was that in the beginning? Because you’re right there in the digital bank disruptors globally now. But when you started, the internet, digital was much less of a thing. It was still quite physical. How did people find you? How did they know that you had a great product?
Gerrie Fourie: Well, if you look at 2000, there was no digital, there were no apps. If you look at the iPhone, came in 2007. Apps really came in about ’11, ’12. But we realized we need to have branches. So, we said from the beginning, if we go into a particular area, we will dominate. I remember the first time we opened up branches in Belo, we didn’t open one branch, we opened five. In the Transkei area, I came back and said, “But there’s no other banks,” and we opened 20. So, we believed in dominance in a particular area and made certain we’ve got the distribution.
But then we said immediately, a branch we opened from 9-3:30 like a typical bank, we miss work retail hours. So, we opened immediately from 8 to 5, and immediately we said but 8 to 5 is not enough, let’s go 8 to 7. Some of our branches were open until 10 at night because we said we need to be available for our staff and we need to operate. In 2013, ’14, we brought up the app and became real digital. But the nice thing with what the digital has done is we’ve taken basically all the transactions out of our branches and 95% of our transactions is now done on the app because you can do it 24/7. And our branches are actually strong selling capabilities and by selling into our client base. That’s helped us tremendously.
I get a lot of the question but why have you got, in this age, still branches and digital? It’s just that we’ve seen digital as performing very much as transactional capabilities, but when you want to interact with a client, if you want to connect with a client, if you want to sell into a client, a branch is a critical part of our success.
Hugo Scott-Gall: And how did you know what clients want? Is it well, look, here’s the existing product and we can see the things that are wrong with it? Or is it a little bit of this sort of Steve Jobs, which is people didn’t know they wanted an iPhone until there was one available? Do you just have good instincts or are you working backwards from points of pain?
Gerrie Fourie: Two ways. Working backwards is critical. So, whatever we do, we’re working backwards. So, we start with the client and working backwards. But spending a tremendous amount of time in the market, tremendous amount of time in the branches, talking to our consultants, talking to our clients. The first 12 years I was basically Tuesday night out, Thursday night back, but really spending time in the market, understanding the flow, understanding the needs, talking to clients, be involved. Then I will come back and get with our IT people and say we need to do X, Y, Z. That’s really understating the client and working with the client. Still today, working backwards for us, we look at the different segments of the market, different clients, and really trying to understand what they need, what they really want.
I think what has helped us is the fact we are obsessed with simplicity and transparency. I always challenge our teams if you bring out a product, we need to be 20% better than the market. Not two percent or five percent, because it is extremely difficult to sell it. But if I look at the six Ps in the typical marketing piece, product, price, positioning, promotion, place, and people, are you 20 to 25% better? Then you can really think completely differently and be innovative designing products.
Hugo Scott-Gall: You say that you challenge yourselves to disrupt yourselves every one to two years. What does that really mean?
Gerrie Fourie: You look at yourself. In the beginning, every two years I would appoint a team of 10 to 15 very young people and say, “If you’ve got an outside company and you have to disrupt us, what would you do? What would you think as a competitor?” We challenge ourselves the whole time. If I go into budgeting, if I go into pricing, if I go into product, we think the whole time how do we disrupt ourselves? I’ve seen quite a lot of companies that is making quite a comfortable profit and then the opposition undercuts them. So, you need to ask that question and say, “But are you fair to the client? Are you fair to yourself?” If you have to, cut your process, cut your futures. So, you need to disrupt yourself. You need to look at yourself and say are you doing it in the best way for a particular client.
Hugo Scott-Gall: Has that gotten harder as you’ve gotten bigger, more successful? You can’t help it, but incumbency creeps up on you or you’ve got people they’ve made a lot of money through their share options, whatever. It just gets harder. Maybe you disagree with me, please tell me if you do. It just gets harder to self-disrupt. It’s easier to do when you’re five years in, you’re small, you’re nimble, you’re all hungry. Fifteen years in, 20 years in, how do you stay hungry? Is it harder to disrupt yourself?
Gerrie Fourie: You need to have that thinking mentality to disrupt yourself. I look at last year’s budget process, we looked at our transactional fees. And we had 34 fees. I challenged the team and said, “But this is not simplistic. This is not transparent. This is not Capitec. Our clients are not understanding it because we fell in the trap of the accountant saying each product must make a 10% or 20% ROE in your price per product.” Then we brought up the 1, 2, 3, 6, and 10 process strategy. So, we’ve got five pricing points. It cost us 2-300 million. But we were quite happy with making that decision because it’s the right decision because it links back to our fundamentals of simplicity.
Hugo Scott-Gall: So, how do you think about risk, first of all? How do you define risk for your business?
Gerrie Fourie: Well, one of the interesting things is a retailer thinks client first and then risk. A banker thinks risk and then client. We believe we’re retailers. So, we first look at the client and then we look at the risk. I think your biggest challenge in banking is on the creative side because—And I’m not talking market risk, client risk, and all of that. I’m just talking pure operational risk. It’s basically your IT systems, making certain that your IT systems are strong, stable, and can produce. And it’s the one thing I’ve learned is if you don’t upgrade your system every four, five years you create legacy and you’re going to crash somewhere or it’s not going to work. It’s like a car, every four or five years you need to replace a car. IT systems are exactly the same.
And then you’re starting with creative risk. And creative risk is a little more complex because you need to look at the economy, you need to look at what industries are performing and then make decisions on that. So, I think that’s the two biggest ones. But you need to start with the client, not with risk. The moment you start with risk, you’re on the wrong foot.
Hugo Scott-Gall: I hear you. Can we talk about decision making? I want to talk about how you as an organization make decisions and how that’s changed over time. And then I also want to talk about how you as individual make decisions and how you’ve changed over time.
Gerrie Fourie: The one thing, I spoke about the whole CEO principle, and that’s one thing, whenever I’m on a podium talking to our own staff, I really—I hate committees because committees are where people hide and people don’t want to make decisions because they hide between the other committee members. And I say our business owners must take decisions. And I say if you make a decision that’s the wrong decision, that’s fine. But if you make a decision, for me what is critical is it’s not best for you, it’s not best for your department, but it’s best for the company. And give me two or three reasons why you’ve made that decision. If your reasons are good, then it’s fine. Then we correct it because we can’t all make correct decisions.
So, it’s having that culture of making decisions. Because I can’t make every single decision in the bank. And what typical big companies have done is they create those layers of committees and delegation of authorities and things like that. But we’ve only got eight layers between myself and our consultants. It’s how you create and install that accountability and ownership that you need to take that through.
I think from my side, when you were younger and you were just becoming a CEO, you’re always uncertain because you have very strong people in your team. And as you get older, you’ve gotten much more confident. But again, I’m saying I’m rather make a decision, go with it, and then if it’s wrong, correct it as quickly as possible. I’ve seen many times people want to make 100% decision. Decision is 80%, go, be quick in the market, and be first in the market. So, for me, decision making is critical to lead a business.
Hugo Scott-Gall: But do you feel you’re more decisive now than five years ago, individually?
Gerrie Fourie: I spent a lot of time in the past in the detail, understanding the detail, and then it was quite easier to make decisions. Now we’re much bigger. You need to allow those people to understand the details. I’ve got a pretty simple philosophy. If I understand it, I let them go. If I don’t understand, I’ll keep on asking questions until I fully understand it, or I will help to get to the right decisions if you don’t understand it. So, questioning, but not questioning a person, questioning the issue, the ball, is for me critical. Because if you question that, you get to the right answers.
Hugo Scott-Gall: Can you talk a little bit about people, about hiring, how that’s changed, what you feel your role is as a CEO in identifying, motivating, stretching, and rewarding talent? How do you think about the people side of things? I still maintain it’s one of those things no one’s found a neat way of turning into academic literature, so therefore it’s not expressly taught but it’s hugely important. I don’t know if even you agree with that statement.
Gerrie Fourie: People is everything. So, if you look at our culture, goes about the client, people, and then delivery. And you can do nothing, you can’t deliver, and you can’t deliver on your client if you haven’t got people. So, managing your people is critical. There’s a massive amount said on the people side. It’s appointing the right people, making certain you’ve got a culture fit, making certain you’ve defined the right leadership traits, make certain people are well renumerated in in line with your renumeration. Just to give you a baby—because this is like a two-hour topic, but if you look at us, if you look at we’ve defined our culture and we’ve defined our leadership traits, so we’ve got nine very specific leadership traits that we’re looking for.
And we’re looking at psychometrical tests from senior to junior appointments, making certain that they will have the cultural fit, that they will have the leadership traits, and that you will have proper interviews with bar raisers, whereby it’s not only the exec or the person where the person will be accounted for doing the interviews, but other people also doing the interviews to make certain we’ve got the right quality of person coming in. And then from here, renumeration is very important. I believe on your senior exec level you need to have a long-term view. You need to be a shareholder. You need to have options that’s coming through. So, we encourage very strongly that you think like a shareholder, you don’t think like an employee.
So, you’ve got a six-month horizon on your options. Senior managers, we’ve got a three-year horizon. Also, we’re very strong chair incentives, that they think like a shareholder. And then you’re middle manager’s more on a one-year incentive. So, we’ve looked at our leadership traits, we’ve looked at our renumeration, we’ve looked at our teamwork, our team ethics. So, yes, I agree 100% with you. With people and managing people properly, you’ll never be successful. It’s interesting, one of those things I’ve said a lot, is if you look at leadership, I think people make leadership too complicated. Because you’ve got all these various definitions.
For me, leadership is all about the why. If you understand why you must do something, you will do it. And that why is mutual. It’s from myself plus whoever is working with myself. Because it’s my job to make certain that he’s crystal clear on why we have to do it and what is the benefit for the clients. And he must make certain that he understands also what he needs to be. If you get that why right, people are motivated and they know where they’re going.
Hugo Scott-Gall: Do companies always use psychometric tests? Or that’s something you’ve introduced?
Gerrie Fourie: We’ve started with psychometrical tests at our consultant level when we started the bank. We were very strict on interviews that we will do two layer or raise the bar interviews. But probably for the last 10 years, psychometrical tests have gone right through the organization. And it’s something that our HR people have brought in, but it’s something we embrace. It’s really difficult to understand how people will always fit in—from an interview, how they will fit into your leadership traits, how they will fit into your culture. I’ve learned over the time, I was more on a 60% in psychometrical tests. I’m now 100% psychometrical test.
But not the psychometrical test just for the sake of doing it. A psychometrical test that’s testing certain things that you really want to be tested to see if this person fits into your culture.
Hugo Scott-Gall: Doesn’t that run the risk of everybody is the same?
Gerrie Fourie: No. Interestingly, we have made goals where you’re looking for metrics, or you’re looking for people that’s different, that are right per test. But people are always different. It’s important that they understand the leadership traits and the culture, that they’ve got the same values. It’s just so much easier then to manage.
Hugo Scott-Gall: When you look at the most successful colleagues you’ve worked with, what do you think are the common traits?
Gerrie Fourie: Coming back to your question of now does everyone look the same, if you look at our leadership team, our exec team, they differ completely. They have different personalities, different backgrounds, etc., etc. But I think they’ve all bought into the culture of our client first and making certain that we go that extra mile on our client. And all of them are passionate about the brand and are passionate of making a difference. Our long-term vision is to really make a meaningful difference in the client’s day-to-day lives. And all of them have got that same burning ambition to make that meaningful difference.
Hugo Scott-Gall: How do you cope with difficult decisions around people? I don’t know if it’s happened, the people you work with for some period of time, they’ve reached their limit or they’re just not performing at a level you need them to, or, indeed, maybe they’re just not trying hard enough. Are you pretty decisive? How lenient are you?
Gerrie Fourie: I’ve learned over the time that you need to be decisive. Interestingly, I was in a Microsoft conference and we were about 15 CEOs talking about people. And Charlie Munger, we were talking quite a lot on what we’ve done, etc., etc. I’ll always remember, he said he wants to ask one question. And he said what do you do with your loyal person who’s been working 15, 20 years with yourselves but the company’s outgrown him. And it was dead silent and nobody could give an answer. We’ve made a deliberate call to say that if that happens, you need to be decisive. And you look after those people. You give them a proper package, but you cut the rope.
Ninety-nine percent of our people we still see today and they’re still happy. They’re very happy that we’ve made that call. But I’ve learned with people you need to be open, you need to be direct. You need to talk about performance. If there’s a difference between two people, it’s normally not one thing. It’s 5 or 10 small things that’s caused people to be unhappy. That’s where I’m a strong believer of openly having those robust and honest discussions. So, for me that is part of management. And we encourage that.
Hugo Scott-Gall: When you make a decision, it’s clean, you move on, you don’t think about it? Or are you a revisit decision? Do you have any kind of regret function and you’ll wake up at two in the morning? Or are you one of those people who can sleep well for eight hours every night?
Gerrie Fourie: No. Sleep is always a precious commodity because you make decisions. And for me it’s always good to revisit that and must make certain that you’ve taken everything into consideration. And if I doubt, I will go back to whoever is the manager and we will have those debates. But I like making those calls and go with it. I don’t like you go two, three, four, five months and you don’t make the decisions. I’m a firm believer of having robust debates, really try and understand the problem, make a decision, go with it, and then very clearly monitor what’s happening with it. Because if you make the wrong decision, then go back and tweak or change it. I don’t like to procrastinate over a decision. You need to go, but you need to evaluate the whole time and say have you made the right decision.
Hugo Scott-Gall: You’re stepping down from being CEO. As you look back now is it harder to be a CEO today than it was when you became CEO in 2014. A decade ago, not that long ago, it was a different world in some ways. Do you think it’s harder now being a CEO, just the scrutiny, the prevalence of social media, the transparency that’s required? Maybe a CEO has to be more vocal around perhaps broader social issues, more is expected of a CEO, more is expected of a company and their role in society than perhaps it was a decade ago. Do you agree with any of those statements? Do you think it’s harder now?
Gerrie Fourie: Yeah, for sure. If you just look at social media, and I’m not a big fan of social media because social media, there’s no accountability. I believe if you want to say something, there must be accountability. If you just look at what we had to handle in the last five years, you had COVID, you had Russia/Ukraine, you had what is happening with Trump. So, the world is just moving much quicker and faster. Communication is much quicker and faster. So, the pressure is more. So, it is challenging, but that’s the way the whole world is going. I think that’s where you must embrace tools like AI, etc., etc. to market and make yourself quicker and faster. And you need to be agile.
Hugo Scott-Gall: Great. Look, I want to say thank you very much for coming on the show. I appreciate it. It’s always fascinating to hear how entrepreneurs become CEOs, build great companies. I think you’ve really shared with us that. So, Gerrie, thanks a lot for coming on. Great to see you.
Gerrie Fourie: Thanks, Hugo. Thanks a lot.
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