South African retailer Pepkor is stepping deeper into financial services with plans to launch a digital bank as competition across Africa’s fintech sector continues to broaden.

The project, known internally as PlusB, marks a strategic push by the retailer to diversify beyond its core retail operations and tap into rising demand for low-cost digital banking.

The move comes as more non-bank players enter financial services, reshaping competition in South Africa’s banking sector.

Pepkor says its approach will rely on its existing retail footprint, rather than building a bank from scratch in the traditional sense. The group is targeting a launch in 2027, pending regulatory clearance.

Unlike earlier entrants that relied almost entirely on digital platforms, Pepkor is betting that physical access points will remain relevant in everyday banking.

That mix of stores and digital tools sits at the centre of its strategy as it positions PlusB against established players in the market.

Build cost kept below R1 billion($62 million)

Pepkor has set a ceiling of under R1 billion (about $62 million) for the full build-out of PlusB, a figure that includes both operating and capital expenditure.

Group chief financial officer Riaan Hanekom told investors the total cash outlay is expected to remain within R920 million($57 million) ahead of launch.

The budget places Pepkor below rivals such as Discovery Bank and Old Mutual’s OM Bank, which have spent several billions of rand to establish their platforms.

Analysts say the lower cost reflects Pepkor’s decision to build on existing infrastructure rather than develop entirely new systems.

Regulatory progress and early spending

So far, Pepkor has spent R315 million($19.4 million) on the project, including R224 million($13.8 million) for fintech firm CloudBadger, acquired in October 2025.

The remainder includes system integration work and operating costs linked to early-stage development.

The group has secured initial approval from South Africa’s Prudential Authority and has submitted its application for operational readiness.

A final decision on its deposit-taking licence is expected later this year, clearing the last major regulatory step before launch.

Retail network as Banking infrastructure

Pepkor’s strategy leans heavily on its retail network, which it plans to convert into a hybrid banking system combining physical and digital channels.

Chief commercial officer Garth Napier said customers will be able to transact across more than 6,500 stores nationwide.

The group already processes about 44 million cash-in and cash-out transactions a year, alongside millions of bill payments.

It also operates the Flash merchant network, which includes 176,000 traders expected to extend services such as transfers, airtime purchases and utility payments.

Profit targets and market outlook

Pepkor expects PlusB to start generating earnings in 2030 and reach breakeven by 2032.

It is targeting a return on equity above 30% and a combined deposit and loan book of about R8 billion each once fully scaled.

The company enters a competitive field that includes TymeBank, Discovery Bank and Old Mutual’s OM Bank. Analysts say execution, regulatory timing and customer adoption will determine whether Pepkor’s retail-driven model can gain ground in South Africa’s expanding digital banking market.