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Discovery Bank’s complex pricing

Layers of choice behind its ‘three simple accounts’ means there are actually 12 different pricing options.

Discovery Bank’s monthly account fees compare fairly favourably with those of its rivals, especially when one looks at the prices of its bundled offerings.

Its bundled Gold account (technically the Discovery Gold Card and Transaction Account) has a monthly account fee of R90, the bundled Platinum account costs R135 per month, and the bundled Black account is priced at R325 per month.

However, a separate Vitality Money premium is levied on the accounts which means their effective costs per month are higher. Whether Discovery separately charges for Vitality Money because of legal or compliance reasons is unknown.

The entire proposition of Discovery Bank is premised on Vitality Money, which rewards clients for ‘banking healthier’ with dynamic interest rates on both savings and credit, as well as boosted Vitality discounts and cashback.

Reward boosts for good behaviour

Vitality Money behaviour will effectively ‘boost’ a customer’s core Vitality rewards discounts. For example, the up to 35% discount on local flights on partner airlines can be boosted to as much as 60%. On savings, rates of up to 6.5% per annum on so-called lazy balances and 7.5% per annum for demand savings can be achieved. On borrowings, up to prime less 1% can be achieved, depending on behaviour.

Without Vitality Money, much of the proposition disappears and any of the three accounts arguably becomes just another bank account.

A more accurate comparison would be to use the total price paid per month; the account fee plus the Vitality Money premium. For Gold, this means the effective (bundled) monthly price is R125, for Platinum it’s R180 and for Black it is R380.

‘Full banking suite’ options

Black

Platinum

Gold

Monthly account fee

R325

R135

R90

Vitality Money premium

R55

R45

R35

Total

R380

R180

R125

Cash withdrawal at local ATM

Unlimited

8 free

4 free

Cash withdrawal at local POS

Unlimited

Unlimited

Unlimited

Cash withdrawal at international ATM

Unlimited

R65

R65

Debit orders

Unlimited

Unlimited

Unlimited

Payments

Unlimited

Unlimited

Unlimited

Real-time payments

Unlimited

R10

R10

Declined transactions

Unlimited

Unlimited

Unlimited

* A fair usage policy applies for so-called ‘Unlimited’ usage.

** Once bundled limits are reached for cash withdrawals at local ATMs on the Platinum and Gold accounts, a fee of R4.50 plus 1.5% of the amount withdrawn is charged.

At first glance, transaction fees are simpler than those seen at many other banks. Much of this is due to the fact that Discovery Bank does not have a physical footprint, either through branches or ATMs. 

Discovery Bank has not yet disclosed a fee for cash deposits, and it is uncertain how this will even be possible given the absence of a physical footprint. It could, like Investec, reach an agreement with one of its rivals to use their ATM infrastructure for deposits.

The banking suite products (effectively the bundled accounts) are, however, not the only ones on offer. Customers can have just a transactional account, where they pay either a flat monthly fee (which would include bundled transactions) or per transaction. Per transaction pricing is not dissimilar to rates on offer at other banks.

 

All accounts

Cash withdrawal at local ATM

R4.50 + 1.5% of withdrawal amount

Cash withdrawal at local POS

R2

Cash withdrawal at international ATM

R65

Debit orders

R3.75

Payments

R2.50

Real-time payments

R10

Customers can also choose to just have a credit card. This means the over 300 000 existing Discovery cardholders don’t necessarily need to move all their banking to Discovery. It also means that the bank’s pricing options are not quite as simple as they seem. Far from a proposition which seemed to offer just three different accounts, there are actually 12 different pricing options for the accounts and cards on offer.

 

Monthly account fee

Discovery Black Card and transactional account

R325

Discovery Black transactional account (one monthly fee)

R250

Discovery Black transactional account (pay per transaction)

R60

Discovery Black Card

R110

 

 

Discovery Platinum Card and transactional account

R325

Discovery Platinum transactional account (one monthly fee)

R180

Discovery Platinum transactional account (pay per transaction)

R30

Discovery Platinum Card

R60

 

 

Discovery Gold Card and transactional account

R325

Discovery Gold transactional account (one monthly fee)

R105

Discovery Gold transactional account (pay per transaction)

R5

Discovery Gold Card

R30

There are no major differences between the transactional accounts, save for the number of free cash withdrawals at ATMs locally as well as the charges on Platinum and Gold accounts for real-time payments and international cash withdrawals. Black and Platinum accounts get automatic warranty extension of up to 24 months, as well as short-term protection against theft and accidental damage of purchases made with the debit card.

The real differences are in the credit cards (and therefore the ‘full banking suite options’), where the dynamic discounts vary between the three.

Cashback on …

Black

Platinum

Gold

Flights

Up to 60% local and up to 50% international*

HealthyFood

Up to 75%**

Up to 50%

Up to 40%

HealthyCare and HealthyGear

Up to 50%

Up to 50%

Shell and BP (fuel)

Up to 15%

Up to 15%

Up to 10%

Uber

Up to 15%

Up to 15%

Up to 10%

* Six free visits each year (for the cardholder and a guest) to more than 1 000 airport lounges globally also included.

** Special offer until September 30, after which the max will drop to 50%.

The overly complicated fee structure, however, shows that the bank’s product designers (and actuaries?) have been suckered into trying to cater to every possible type of customer across its base. But customers are crying out for simplicity.

Taken as a whole, its pricing is nearly every bit as complex as core account options at its more established rivals. If it needed to try and appease its existing credit card base, it could’ve simply offered three credit card-only options and the three full suite options (comprising the credit card and transactional account). How large would the market realistically be for only a Discovery Bank transactional account?

Perhaps it will get to a simplified offering over time. Judging from most of its competitors, however, that’s highly unlikely.

Hilton Tarrant works at YFM. He can still be contacted at hilton@moneyweb.co.za.

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COMMENTS   13

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So who qualifies for what card?

Do pensioners get the ”peanut gallery” option etc?

I think you can make that assumption. I have it in writing from Discovery Card that ‘investment income is irrelevant for credit assessment’, so why would, say, income from a living annuity be any different ?

with 60% off flights, how much does Discovery lose and how much does the airline cough up?

Does BP give up 15% on fuel, or does Discovery?

Hopefully some very auditors somewhere have their heads around revenue recognition, costs and contingent liabilities and reserves and provisions before they sign off. Constantia Health & Racquet (for older readers) turned out to be just a Racket

Hilton has me confused already..in the text ‘discount on local flights on partner airlines can be boosted to as much as 75%’, while in the table this is ‘up to 60% local and up to 50% international’. The operative words being ‘up to’, this won’t just be a bank incentive but involve cross links with other products, and subject to various limitations.

It’s really on all those detailed Ts&Cs that the value of an account will be judged, rather than the basic charges.

Discovery banks on complexity as it’s business model (see what I did there?)

It’s easy to BS clients when they can’t understand what you’re doing

Thanks for the article Hilton. Been with Discovery Card since its inception. I use this card considerably…to purchase practically everything. Most disappointed with this new complicated offering. We waited so long for this product offering, which leaves a lot to be desired for (and the usual smoke and mirrors). There are a number of hidden costs. Like you pointed out, the additional cost for vitality money and also the additional cost for secondary cards, which is not clear to customers. One would have thought that a new online bank would have kept the bank fees low…much lower. However, not Discovery though. Always complex and giving you less benefits than one had before, consistently year on year. I have always been a huge supporter and fan, however I am seriously considering not taking up the new offering.

If you are an existing Vitality member, you already get flight discounts and 50% off fuel on Vitality drive – so how does having the bank account help? So confused. I thought Discovery bank and Vitality would go hand in glove. More like foot and mouth.

JAB. Just.Another.Bank.

Aye, as with “Medical Aids” and insurance, Discovery have twigged that in essentially unregulated SA, a confused mumbo jumbo of “offers” essentially matching other banks can, like the other banks, make a great deal of money.

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