Happy Sunday.

South Africa's interest rates just went up for the first time in three years. Today we’re providing an update on the retailer building a bank from scratch for R920 million, and Nigeria's central bank is reminding fintechs that physical distribution still matters in the age of software. Oh, and could this be the beginning of an acquisition spree for Yoco? We think so.

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Let’s get into this week’s edition.

Pepkor plans to launch plusb bank using its existing network of 6,500 stores and 32 million customers. Assume just 5% of those 32 million customers eventually open a bank account and each customer keeps an average balance of R2,500.

How much in deposits would plusb gather?

A) R400 million

B) R1.6 billion

C) R4 billion

D) R8 billion

Scroll to the end for the answer.

AFRICAN PAYMENTS

WHAT'S HAPPENING

Nigeria's central bank relaxed rules governing Point-of-Sale (PoS) terminals, increasing the permitted operating radius from 10 metres to 70 metres. The original rules required merchants and banking agents to process transactions very close to their registered location as part of efforts to reduce fraud and improve oversight of Nigeria's rapidly growing agency banking sector.

While the change sounds technical, it actually reflects a broader challenge facing regulators across Africa: how do you improve security without making it harder for businesses and banking agents to serve customers?

THE PLAY-BY-PLAY

To understand why this matters, you first need to understand how many Africans access financial services.

In developed markets, most people can open a banking app, transfer money, apply for credit, or make payments without ever leaving their homes. Across much of Africa, however, millions of people still rely on physical banking agents, merchants, and cash-in/cash-out points to access the financial system.

These agents perform functions that bank branches used to provide. They help customers withdraw cash, deposit money, make transfers, pay bills, and access financial services in areas where traditional banks have limited presence.

Nigeria introduced geo-fencing rules to improve traceability and reduce fraud. But operators argued that the rules were too restrictive in practice because agents often move around shopping centres, markets, taxi ranks, and informal trading areas where precise location tracking can be difficult. Expanding the radius gives agents more flexibility while still allowing regulators to monitor activity.

THE IMPACT

The deeper lesson is that financial inclusion is not just a technology problem. It is also a distribution problem.

For years, investors have focused on digital wallets, banking apps, AI, and fintech platforms. But the companies taking ground across Africa are often the ones that combine technology with large physical distribution networks. M-PESA has agents. MTN MoMo has agents. Capitec has branches. Pepkor is building banking capabilities through thousands of retail stores. Do you see where we’re going with this?

The Nigerian regulator's decision is a reminder that the last mile of African banking still happens in the physical world. The future of finance may be digital, but customer acquisition, cash movement, and financial access still depend heavily on real-world infrastructure - especially in emerging markets.

And what that means for banks and fintechs, is the competitive advantage is no longer just building the best app or digital environment. It’s building the strongest network that connects digital finance to everyday commerce.

WHAT'S HAPPENING

Pepkor - the South African retail conglomerate behind Pep, Ackermans, HiFi Corp, Incredible Connection, and Bradlows - revealed its new bank called plusb will cost R920 million to build and launch in 2027. 

The bank will operate as a fully licensed standalone institution with both digital and physical distribution channels. Customers will be able to bank through an app while also accessing services through Pepkor's extensive retail footprint. Pepkor acquired banking technology company CloudBadger for R252 million in 2025 to provide the core banking platform that will power accounts, payments, lending, and transactions.

The ambition is significant. Pepkor already serves millions of South Africans through its retail, credit, insurance, and cellular businesses and wants to convert that reach into a fully-fledged banking relationship.

ZOOM IN

R920 million sounds like a large investment until you compare it with what other banks spent getting off the ground. Discovery Bank reportedly cost more than R3 billion to build. Capitec spent years investing before reaching meaningful scale.

Of course, Pepkor's advantage is that it is not starting from scratch.

The company already has 6,500 stores, relationships with millions of customers, extensive transaction data, and existing credit and financial services operations. Most importantly, it already owns the hardest part of banking: distribution.

A traditional bank must spend billions acquiring customers, building branches, creating awareness, and convincing people to trust a new brand. Pepkor already has customers walking through its stores every day. Instead of building distribution, it can focus on converting existing retail relationships into banking relationships.

That dramatically changes the economics.

SO WHAT

If management is correct, the R920 million investment could unlock a banking business with significantly lower customer acquisition costs than most new entrants.

The challenge is trust. Customers already trust Pepkor to sell clothing, furniture, electronics, and credit. Banking requires a different level of confidence because customers are trusting a company with their salaries, savings, and financial future.

What’s significant is that Pepkor have the retail banking playbook: GoTyme Bank. formerly TymeBank demonstrated that retail-embedded banking can work extremely well with significantly low Customer Acquisition Costs. Capitec proved that challenger banks can scale. Pepkor now enters a market where the playbook is already established. The question is whether Pepkor can execute it better than everyone else.

The deeper lesson is that banking is increasingly becoming a distribution business. The institutions with the strongest customer relationships, physical reach, and daily engagement may have a bigger advantage than those with the most sophisticated banking technology.

Yoco’s becoming much more than a payments company. We recently wrote about their new German CEO, Carsten Höltkemeyer, former CEO of European embedded finance platform e platform, Solaris. He begins his official tenure on Monday the 1st of June.

Most people know Yoco for its portable card machines used by thousands of small businesses, restaurants, coffee shops, and market stalls across the country. Since launching in 2015, the company has grown to serve more than 200,000 merchants.

This week, Yoco acquired Dyner, a South African startup that uses AI to help restaurants manage their businesses or as they like to call it “restaurant intelligence”. In short, Dyner's software helps restaurant owners analyse which menu items are most profitable, understand peak trading periods, manage inventory, and automate parts of their operations. In simple terms, it helps restaurant owners run their businesses more efficiently.

PAST ACQUISITIONS

Building on its earlier acquisitions of Cobi Interactive (2019) and Dado (2021) to scale engineering capacity and app development, Yoco acquired fintech development agency Nona Digital in 2022 to accelerate its product roadmap and bring highly specialized fintech professionals in-house.

WHAT’S THE STRATEGY?

So, at first glance, Yoco’s most recent acquisition looks like a payments company buying a software company. But in reality, it signals a much bigger strategic shift.

Payments are becoming increasingly commoditised. Businesses can choose between Yoco, iKhokha, Adumo, banks, in the POS category as well as a growing number of payment providers offering similar services. When products become similar, competition often shifts to price. That’s a race to the bottom and a difficult place to build long-term competitive advantage.

But software, now that changes the equation. A merchant can replace a card machine in a day. Replacing the software that runs your inventory, staff scheduling, menus, customer data, and reporting is far more disruptive. The more deeply Yoco embeds itself into how a business operates, the harder it becomes for that business to switch providers. That’s the sweet spot.

BEYOND PAYMENTS

The new CEO appointment and this acquisition suggests Yoco is moving beyond payments and positioning itself as a broader OS (operating system) for small businesses. We expect 2 to 3 more acquisitions in the short term to plug capability gaps and build out a truly defensable position in this new category. That strategy somewhat mirrors what companies like Shopify pursued internationally: they expanded their software offering and eventually owned a larger share of the customer relationship. That’s the endgame.

WHAT’S NEXT?

So what exactly is next for Yoco? Expect more product expansion, more automation, more AI, and potentially more embedded financial services. The long-term opportunity isn’t processing payments, they’ve been there, done that. The opportunity’s becoming the platform small businesses use to run their entire business. Profitably.

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On 31 May 1910, the Union of South Africa was officially formed, bringing together the Cape Colony, Natal, Transvaal, and Orange River Colony into a single country. The modern South African economy, financial system, and banking sector were all built on top of that foundation.

And the answer:

Answer: C) R4 billion

Calculation:

The most valuable asset in banking is often not the banking licence. Again, it’s distribution. Pepkor already has millions of customer relationships and thousands of physical locations. If even a small percentage of those customers become banking clients, the deposit base becomes meaningful very quickly.