Discovery will have the advantage of leveraging data on its 300,000 existing credit-card holders and about 1-million Vitality members when the group launches its new bank in March 2019.
Adrian Gore, founder and CEO of Discovery, presented what he termed the world’s first "behavioural bank" in Johannesburg on Wednesday, saying it will comprise a full retail offering.
"It’s going to be a proper bank. It will be omni-channel with physical branches, call centres and a digital platform, but it will be mobile led.
"We will launch it at the mass affluent segment, but expect it will appeal to all segments," Gore said.
The broad focus is in contrast to other new entrants to SA’s highly concentrated banking sector, which is dominated by Standard Bank, Absa, First National Bank, Nedbank and Capitec. TymeBank, a digital bank controlled by billionaire Patrice Motsepe, will target mainly unbanked and underserved clients and small and medium-sized enterprises, while Bank Zero, which is chaired by former FNB CEO Michael Jordaan, will target business customers.
As the newest division of an already large financial services conglomerate with medical aid, insurance and investment products, Discovery’s bank will have some substantial advantages over other new entrants to the sector.
"The value proposition seems to be built around the Vitality model — rewarding people for better behavioural outcomes. So I expect that they will begin by trying to convert the 300,000 active Discovery Card holders, and then the roughly 1-million Vitality users in the initial phase of growth," said Patrice Rassou, head of equities at Sanlam Investment Management.
To illustrate the scope Discovery’s existing customers offer the group, Investec Private Bank runs profitable operations with only about 100,000 customers.
Discovery’s bank is in the final stages of testing and will be formally launched to the public in March 2019.
The offering would initially comprise a transactional banking product with overdraft facilities and a savings account, and would have about 3,000 employees at launch, the company said.
In tandem with the bank offering, the new Vitality Money application, which will be embedded in the banking app, will offer incentives for good financial behaviour.
This will include discounts offered through the Vitality partner network, as well as through innovations such as dynamic interest rates. Higher rankings on Vitality Money would lead to lower interest rates on debt or higher interest rates on deposits, for example.
Scores on other Discovery products, such as Vitality Drive, which offers discounts to car insurance clients based on the way they drive, and Vitality Health, which offers incentives for healthier eating and exercise, will also be incorporated into the bank offering to boost discounts, for example on flights and healthy food.
"We will seek to integrate the offering with all aspects of
our existing product lines; that’s a central part of our strategy," Gore said. Discovery’s army of financial advisers also have a role to play.
"To reach one of the goals on Vitality Money will require clients to conduct a financial needs analysis.
"This can be done through the app or with the help of our financial advisers," said Discovery Life CEO Hylton Kallner.
This could lead to discounts on life insurance premiums,
he said.
Rassou said, "with the exception of some of the Discovery Card users, all the people using Vitality are already banked. So that is where the shared value proposition will be important.
"If they can distinguish themselves by making individual client propositions based on the granularity of the information they can obtain through the likes of Vitality, then it may well
be compelling."
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