Chris Meyer: So I’ll start to maybe approach the question and I’ll maybe bring Lincoln in. So there’s no empirical evidence of exactly where growth comes from. We have anecdotal evidence speaking to our customers as we onboard them, and we can see what’s going on in the market. we can see the significant reduction in numbers in terms of Postbank’s customer base, that is public information. So yes. I think Lincoln talked about 2 categories. Category 1 is new grant recipients entering the base. And that is about a 10% number per annum coming into the universe of grant recipients. And then there’s this trend moving away from the Postbank post office. I think on the whole, that trend is — of moving away from the post office is the biggest trend, and that is the opportunity that is most present for us. And that is something that we’re obviously very well focused on and positioned for.
Lincoln Mali: Yes, if I could just add to that. What’s important for us is how we become competitive and how we have a value proposition that appears to customers, so that we’re not just relying on something goes wrong with the post office. We want customers to be attracted to us to want to see a very proposition that speaks to them. And we want them to want to come to us. And we’re getting a lot of referrals from our existing customers to other customers because of the services that we provide. We’re also getting a lot of traction from our engagement with community leaders and all of that. So all of that work helps us to position ourselves well. So if there are troubles in the post office, obviously, it will count in our favor.
But our focus is making sure that we are relevant and we give a proposition that makes sense for customers. Because if we just only rely on problems in the post office, if the post office fixes this problem, then we don’t have our room to grow. So there is a competitive market out there with banks and retailers, and we want to be one of those that are preferred by customers because of our value proposition.
Operator: Next question was submitted from David Garrity. Congratulations on a solid quarter and the good news on the reduction of funding costs. On the midpoint revenue guidance that you’ve given, you indicated about 12.5% year-over-year growth. This is lower than previous year’s growth. What are the factors leading to this?
Chris Meyer: So I think — David, thank you very much for the question. I think firstly, you must remember that prior year — so the growth between FY ’22 and FY ’23, you need to take into account the inclusion of the Connect Group for a partial period. So the addition of the Connect Group into our numbers last year make it very difficult to make a like-for-like comparison when we look at FY ’24 and beyond. And that is why we gave guidance at the start of the year, so last quarter, around expected revenue growth, medium-term targets of around — I think we said 18% to 20%. So that would be our full year sort of expectation around guidance where we said our full year revenue expectation of between ZAR 10.5 billion to ZAR 11 billion.
And we also gave, if you recall, an indication of a medium-term outlook beyond that. So we believe the guidance we’re giving today in terms of next quarter is consistent with that medium-term outlook and full year guidance. And I also think what’s important is to highlight is we’re coming into Q2 and Q2 for us is seasonally an important time. Seasonally, it’s our busiest time, particularly in our merchant business. And you would have seen that highlighted in the slides in the presentation earlier. So I think we need to look at the revenue guidance within that context as well.
Operator: The next question is going to come in from the phone from Theodore O’Neill at Litchfield Hills Research.
Theodore O’Neill: Congratulations on the good quarter. My question is about ARPU in the consumer segment. You’re showing a 12% growth year-over-year in ARPU. And I was wondering a couple of questions around that. Should we expect that number to slow given the economic headwinds? And then as we think about that number going forward, do you target a growth rate for that or an absolute number to achieve in ARPU? Just wondering if you could talk about those issues.
Chris Meyer: I’m happy to take the question. Theodore, thanks for the question around ARPU. So for us, yes, we’re happy with the growth that we’ve seen in ARPU. For us, the focus is actually around penetration into our customer base in terms of the ancillary products that we provide. So just to remind the primary base, our focus is around the EPE account and where we were — and transactional fees on the account. And from there, we look to offer both insurance and credit to our customer base. And our focus is growing the penetration levels. And the growth in ARPU has come from moving our insurance penetration levels from — we spoke about moving from 25% to 30%. If you look back 18 months ago, that number was around 20%. So we’ve seen very good growth in penetration and insurance.
And we’ve maintained a penetration of around 40% on our loan book, even with the growth that we’ve seen in the customer base. So those are the drivers. We haven’t set a target, if you like, in terms of overall penetration. I think it’s too early for us to set that out, but that should give you a sense of what’s been — what’s underpinned the overall increase in revenue primarily.
Lincoln Mali: Can I maybe also add that in these difficult times, we are also watching the quality of our businesses. And even during this difficult time, the loan loss ratio has remained stable but we continuously watch the quality of our book, and we have not seen any material deterioration in that regard. And also in the insurance side, we still have high collection rates in that space that are above industry norms and even our lapse rates are well below what’s happening in the industry. So therefore, for us, we are watching not just growth, but also quality of that growth. And therefore, as Chris was saying, and ARPU that is resilient during these difficult times.
Operator: A few more here that have been submitted over the chat. How does the removal of Kazang Pay Advance impact growth in the Merchant Division in the next few quarters on other revenue lines?
Chris Meyer: Steve, do you want to pick that up?
