The Competition Commission has recommended that the Competition Tribunal approve Capitec Bank's proposed acquisition of Walletdoc, subject to conditions aimed at safeguarding competition in South Africa's digital payments market.
Capitec, one of SA’s largest retail banks, provides retail and business banking services, including transactional accounts, savings and investment products, credit, merchant acquiring, payment processing and digital payment services.
Walletdoc, which is owned by Cyprus-based Walletdoc International, operates as a third-party payment provider and system operator.
The fintech firm offers payment gateway, payment orchestration, merchant acquiring and payment processing services, enabling merchants to accept card payments, EFTs, Capitec Pay, PayShap and other digital payment methods across e-commerce and point-of-sale channels.
In December, Capitec announced its intention to buy fintech start-up Walletdoc for R400 million.
According to Capitec, the purchase consideration comprises a cash payment of R300 million (subject to customary adjustments upon conclusion of the transaction) and a deferred earn-out of R100 million, linked to the Capitec share price and payable in cash over three years, subject to the achievement of certain milestones over that period.
The commission says it initially found that the transaction raised competition concerns because Walletdoc competes with other payment service providers (PSPs) while also providing merchants with access to Capitec Pay, one of the country's growing digital payment platforms.
To address these concerns, Capitec agreed to a series of behavioural conditions.
Under the proposed conditions, the merged entity must make Capitec Pay available to third-party PSPs that are technically and commercially capable of integrating with the platform, according to the commission.
Capitec will also be prohibited from using confidential commercial information obtained from rival PSPs through their access to Capitec Pay to compete against them.
In addition, Capitec must ensure competing payment rails, including PayShap Request and the Rapid Payments Programme rail, are treated no less favourably than Capitec Pay, except where any differences can be objectively justified by factors such as scheme rules or risk management requirements.
Capitec Pay is a secure, bank-to-bank online payment service that allows clients to pay on websites and apps without typing their card numbers or bank details, but to rather use their phone number instead.
According to the commission, the proposed acquisition does not raise significant public interest concerns.
The transaction is now subject to final approval by the Competition Tribunal.
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