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Behold, Discovery Bank!

The group finally takes the wraps off its offering. Well, sort of …
Discovery Bank will encourage and incentivise behaviour change aimed at making its clients financially fit. Image: Discovery

Perhaps the only real surprise in yesterday’s public unveiling of Discovery Bank was the lack of any pricing information. The bank, which is expected to open to the public in March next year, is built on the fundamentals of its Vitality incentive-and-rewards programme, as has long been suspected.

Discovery chief executive Adrian Gore describes it as the world’s first ‘behavioural’ bank. Simply put, it is premised on “making people healthier, but in a financial sense”, says Gore. He cites five controllable behaviours that are linked to three risks that lead to 80% of the reasons why people don’t meet their financial obligations.

Using a new flavour of the Vitality Money chassis, Discovery Bank will encourage and incentivise behaviour change, much like it does in the health and driving (car insurance) spaces.

While it measures and encourages these behaviours, it is not egalitarian. In other words, you don’t need to be insured through Discovery, as an example, to score well on ‘the driving behaviour’ criterion. Rather, it is important that you are insured.

These behaviours result in a Vitality Money status (on the same familiar Blue to Diamond scale) which then translates into three rewards: dynamic interest rates for both borrowing and saving, boosted Vitality rewards, and weekly Active Rewards for responsible spending. Depending on your status, you could get an interest rate of up to the market rate less five or six percentage points for debt, and up to the market rate plus three percentage points for savings. On the Vitality rewards side, customers will see their core Vitality rewards discounts boosted, depending on their Vitality Money status. For example, the up to 35% discount on local flights on partner airlines can be boosted to as much as 75%. The same extends to all Vitality partners. All of this – the interest rates and rewards – is completely dynamic and changes based on your day-to-day behaviour.

Fusion

The core proposition is the Discovery 1 Account. This is a ‘fusion’ of a credit card and transaction account (not dissimilar to the fusion accounts launched by FNB and Absa in recent years), plus it has a built-in Vitality Savings Account. Gore would not be drawn on fees or pricing, saying only that this aspect would be “market-related”. One could surely expect prices to range between R100-odd and R400/R500 per month, based on pricing of accounts in the market. Like other banks, depending on your income, you’d get either a Gold, Platinum or Signature (Black) card. These will be priced differently, with different features and benefits.

Gore says that while the bank is mobile-led, it has full retail functionality. It will only have a single branch – at the group’s head office, Discovery Place – which will open next year. Like other banks without physical footprints, such as Investec, clients will be able to use any ATM or a network of point-of-sale merchants to withdraw cash and make deposits.

The bank is centred on its app, which is slick (while demoed at least) and boasts innovations such as the ability to take photos of slips and add these to transactions as they’re made. This is stored in your Discovery document vault for later retrieval.

The app-driven bank will allow you to take photos of slips and immediately add them to transactions, which will be stored in your Discovery document vault for later retrieval. Image: Discovery

By leveraging the scale that Discovery has, it also allows you to pay anyone in your contacts using just their cellphone number. It will use the data it already has across its ecosystem to tie together names and contact numbers to authenticate these payments behind the scenes. This is different from other banks, which will simply send an SMS to the other number, with no real authentication.

Payments to other accounts, whether Discovery or not, can be instant. And, while other banks offer similar services, there are sometimes limitations around business hours and they come at a steep price (a market average of R40 per payment). Discovery says instant payments will cost R5 on Discovery 1 and be free on Discovery 1 Plus (its top tier bundle).

Discovery is innovating across its healthcare provider partners Clicks and Dischem, and will allow seamless payments at the dispensing counter for medication. Because Discovery knows what medical aid plan you’re on, and whether payment will be from your medical aid savings account or not, the transaction will be settled automatically in the background and you’ll be able to just walk out the door.

It will roll out airport lounges next year and in 2020 (going head-to-head with the other banks), and will extend its popular and successful ‘Active Rewards with Apple Watch’ benefit to an ‘Active Rewards with iPhone’ benefit, which will allow you to fund a new iPhone for free if you reach your weekly spending goals. It promises more information on both of these in the new year.

Beta testing

The group was in a way forced to do a public launch ahead of the bank being open to new clients. It will beta test, using 3 000 staff and selected tied advisors, over the next four months. Until now, it has been testing in alpha with a very limited number of people (50) under SA Reserve Bank supervision.

Once the bank is open, in March, its existing 300 000 Discovery Card customers will be able to ‘upgrade’ to a Discovery 1 account.

Its switching proposition will also be promoted in the new year, with Discovery Bank CEO Barry Hore saying that “every friction point has been focused on” and that it has some great technology up its sleeve.

Gore says there will be “strong incentives to bring across your salary” but that the bank would play in the “primary and secondary account space”. He sees the addressable market as, practically speaking, anyone who can afford private healthcare. The ‘sweet spot’ is obviously Discovery’s current customers, which total two million adults.

As part of the launch next year, Discovery also intends to allocate 10% of bank shares to black bank depositors. The details of this are still being worked on, but it will be vendor-financed with no risk to the clients. Gore describes this as a “very good thing to do” and suggests it could also use this equity to “drive behaviour”.

Discovery Bank won’t offer home loans or car finance, at least not for the foreseeable future. Gore says it “can’t see a massive differentiator yet”. The bank is also deliberately limiting its integrations with the group’s other products, like Invest (obvious), Insure and Life. This will come.

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

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Great, another offering from Discovery that will have overly complicated rules that change every year to your detriment. Good luck with that!

Complicated or not – the more pressure there is on the Big 4’s pricing, the better.

Motsepe’s Tyme will “pressure” the big four big time!

Funded by your medical aid subscriptions.

No. Not allowed by legislation. The medical aids are ring-fenced.

Discovery Health Administrators arent ring fenced ad that IS where they make their $$$$$$$$

Administrators charge a fee for their services to a health scheme… Discovery has the lowest fee charged by far so you point makes no sense

Discovery rules are so confusing and changing regularly without informing the members. I have been a member of discovery/vitality for over 20 years but I often find that the rules of the game have changed to the disadvantage of the members without any information from Discovery.

“Discovery also intends to allocate 10% of bank shares to black bank depositors.”…”Gore describes this as a “very good thing to do”

Well I guess it is a very good thing that I will not deposit my money in this racist endeavour!

@Timmo: There is no mention of when those shares will vest, but what are the odds that at least 50% of those shares will be sold on vesting?

@Paining when those shares vest are irrelevant. The fact that people are deprived from participation due to race is called apartheid. Apartheid was a system of deprivation. You were deprived of your dignity, your land, your right to vote and any participation in the economy.

Until Discovery publish their ‘complicated’ pricing system and reward levels which depend on the business one has with Discovery, we must assume that pricing will be excessive and subject to rules only a phd graduate can understand in the typical Discovery way.

Going to be a real game changer.We already have excellent banks and this offering will take us to another level.
DISCOVERY-INNOVATIVE AS ALWAYS

How can you say “game changer” when you don’t even know the costs yet. Let alone the hoops one will need to jump through to receive value?

An example of a “game changer”is FNB and their new platform selling houses.

You sound like Discovery’s lapdog…

I agree , who has the time or ability or desire to analize the calculation of your vitality rewards , which is the carrot that must draw you to this bank . Your bank fees , yet undisclosed , will have to make a big contribution to your rewards , and like most humans we will fixate on the rewards , without understanding the costs involved . Clever marketing , but Tyme bank , will beat Discovery on bank fees .

Costs will depend on the colour of your skin!

The leap froward was spoiled by the VBS bank. It should have been a combined step, to show the world, we can. Showing the old banks the door with innovated ways of modern banking. Land can be redistributed, money to.

So Discovery Bank will be a deposit taking institution rather than offering full service. Also by not providing home loans or car financing and getting your salary in their clutches where will you go for home loans and car finance, because in reality other banking institutions are not likely to advance funding. So be wary when financing and finances in totality when moving away from full service banks. Also no mention whether they are going to run cashier lines to enable you to make cash withdrawal, ATM’s?, credit cards?, foreign exchange?

Uhm…
“This is a ‘fusion’ of a credit card and transaction account (not dissimilar to the fusion accounts launched by FNB and Absa in recent years), plus it has a built-in Vitality Savings Account.”
“Like other banks without physical footprints, such as Investec, clients will be able to use any ATM or a network of point-of-sale merchants to withdraw cash and make deposits.”

Ah so if they use another vendors ATM they will incur additional cost compared to a client using his own banks ATM’s – or are they going to be magnanimous by absorbing these cost at shareholder expense

The actual Saswitch rates aren’t that high at all (of course, the actual fees charged by banks to use rivals ATMs are).

Absorb the cost obviously… if you don’t have to pay rent in expensive malls and salaries to staff members who sit around and do nothing all day, if you don’t have to pay fees for cash in transit servicing or insurance for the risks of ATM bombings you and easily divert savings back to your clients Therefore no atm fees one using other banks… it’s pretty simple really if you think about it

I already get more freebies from vitality than I know what to do with, why would I switch to a gimmick bank which will unlikely compete with Capitec at R5.60month? unbelievable value considering the convenience of Capitec’s well established branch network.

Agreed. I recently switched one of my accounts to Capitec (from ABSA). ABSA robbed me for 15 years accompanied by poor service. Capitec is an excellent bank. Now my monthly fees (in total) rarely exceed R10. And I get good interest on the Capitec account. ABSA gave me NOTHING.

No home loans or car finance… then what’s the point of incentivising people with better interest rates?

Bit difficult to give out substantial loans when you don’t have money in the bank…

Innovation using other people’s money is always easy …..
The proof will be in the pudding.
Watching with interest

Exactly! Jordaan’s Bank Zero is started with ALL his OWN MONEY when he sold his FNB shares for his new venture! And TymeDigital of Patrice Motsepe will in all likelihood not discriminate between races in its offerings as this venture does with its free shares.

Let me guess…

Discovery Bank, like it’s insurance/risk products, the real (high) cost will be cleverly disguised by a set of ‘smoke & mirrors’ comprising a difficult to grasp, overtly complex cost & rewards rule-book.

No home loans or car finance yet? Discovery is always clever in focusing on cherry-picking the most profitable areas of banking.

As the wealthy say…a Porsche may appear to a expensive brand, but it certainly offers good value 😉

I’ll wait and see.

To derail the comments – I already have fee-free banking – what I could do with is a decent broker that doesn’t charge 0.5% of trades and monthly fees. Easy Equities is cheap, but not a realistic option due to not being able to set pricing of entry/exit.

Give me a SA brokerage please like my US brokerage account, at a fixed R75-R150 per trade please.

Have you tried GT247?

I had in the past – my understanding is they do CFDs only, not holding actual equities? Has this changed?

If i had enough money i would Short Discovery big time!Pumping up share price through “innovation”. Innovation is doing banking through your Iris not incorporated around a wellness program. Jack of all trades , master of none comes to mind.

The business model is taking advantage of brand loyal clients by perfecting the art of hiding fees through bells and whistles.

They preach from the highest hills about how they changing peoples behavior (manipulation) to “benefit” the client (for all those blind loyal customers , getting free smoothies and some of your own money back after 5 years does not equal value when premiums escalate way beyond CPI and if you just happen to downgrade or change any prod

This complex matrix is designed to keep the mouse on the wheel while siphoning disposable income and distributing to shareholders via expensive , unsustainable products which only benefit a very small few over the LONG TERM! Everyone can enjoy a warm bath but eventually the water gets cold.

The Bank is yet another “Big Brother” product which will determine everything from your interest rate on credit and debt, the demand to take additional Discovery Life insurance based on your medical status (which they will have access to – unhealthy = high interest rate and more security) and lets not forget an the carrot and stick philosophy through Vitality.

The real danger is unsustainable INTEGRATION which is often sold as “INNOVATION”

I attended the “launch” yesterday and, all the negative comments aside (coming mainly from ignorance, I might add), the bank is going to make a huge difference to many people. It’s definitely going to be a kind of “niche'” bank, but for people like me, who have always made a concerted effort to understand and maximise the benefits of Vitality – and been on the highest status for nigh-on 18 years, the additional discounts will undoubtedly neutralise any costs and then some (as they do now).

There’s no “one-size-fits-all” company around and Discovery has never professed to be one either – and – NO – I don’t work for them, I simply reap a lot of the benefits of using their facilities.

There’s no way Discovery will be stupid enough to price themselves out of the market, but, having said that, they have always concentrated on a specific segment of the population and I don’t think they’re about to change that. If you get quality customers, thn your business will flourish – and there isn’t a person alive who can deny that Discovery has flourished – BIG TIME.

I’m not sure why folks are complaining about them not financing vehicle purchases – quite frankly I have obtained better deals on my last three vehicles with institutions that I do NOT bank with because MY bank’s offerings were terrible.

BTW – one of the small items that Hilton didn’t mention is that you will be able to convert all your Vitality Active Rewards to CASH that they will deposit directly into your savings account, so those people who constantly complain about getting smoothies will soon be able to get the cash instead – and it’s a freebie, folks. . .

Bull$hit indeed baffles Brain…

Strange you should say that because I used the simplest form of English I could – I wonder whose brain was baffled. Gofigger. . .

Old school says, bank with bank A, get financing with bank A. It works. You know the bank, the bank knows you. How can I put my (primary) salary in Discovery if my track record with them does’t lead to them giving me finance? Salary deposit + finance when i need it = banking. this is a basic. Still I welcome Discovery Bank. Amandla!

Since only black depositors get shares, hopefully decent people will give the new VBS a miss.

And did anyone notice that Blacks will have more benefits than Whites? I’m serious. It is 2018 and we have a company, portraying themselves as ‘trend setting’, discriminating on race. What nonsense!

Indeed!

Discovery is a trendsetter for sure; I see Shoprite down the road has since shut its doors to whites!

Discovery can keep the black shareholders, I’ll keep my money.

Sorry, but any business that has overtly racist policies and rewards is not worthy of my support. Seems to me Discovery are very happy to promote racism to either appeal to a target market or appease some influential cadres. Can you imagine the outcry if 10% shareholding was being earmarked and vendor funded for other racial groups ? People always wonder just how the Nats were able to entrench their racist policies, well here is any example of how it starts.

Give that man a Bells.
I have no time for a new business trying to prove something to the current racist regime by climbing on their racist band wagon.
I am a member of the Discovery Health Medical Scheme and Im in the process of moving to another medical aid as we speak.

Great! Change your medical aid scheme and hopefully more members are going to do that. Vote with your feet, as they say!

DHS changes rules yearly so that it can make more profit out of you.Oh,and mine more of your personal data.

Discovery is a company that people either love or hate. Those who hate it, are generally those who don’t understand the fundamental concept of vitality whereas those who love it are those who understand the concept and embrace it. Whatever your feelings are, they are a massive disruptor which is exactly what our economy needs, especially with the new banking product. If it can get the masses to embark on healthy financial habits, this will be excellent as the savings rate in SA is abysmally low. Competition is good whether we choose to use their products or not.

You probably mean they’re a “massive disruptor” of attempts at having peaceful race relations in SA!
Oh, and let’s not forget; a MISUNDERSTOOD massive disruptor …..

I have been waiting for the bank to arrive for 3 years. Hoping the rewards are going to give eBucks and Ucount a run for their money. I’m waiting because I really want to move to another life insurer whose program doesn’t change each year. What I signed up for 11 years ago is now unrecognizable and unachievable with Discovery.

I will not be closing my current bank accounts to switch. Even if Discovery were offering loans, the conditions that tipped you to switch banks may not be there in a few years and your banking loyalty will be shredded.

If I may ask, what’s the best life insurance company? Looking for income protection as well as life cover. Heard good things about Momentum and Old Mutual but also may consider PPS.

Hi Zahier. I would go with the simplest product with the lowest premium inflation. If the fine print allows the company to change premiums or make premiums subject to your health status, you’re not really getting insurance – when you’re sick your premiums could go to unaffordable levels exactly when you most need insurance. I wouldn’t worry too much about which company provides the cover as long as it is one of the big brands (they hold enough capital and spend enough money upfront to get you onboard that the policy will always have enough value behind it for it to be in force when you need the cover). Ask for flat premiums. Then compare the prices. If the premium increases and guarantee periods aren’t the same, you can’t compare on price. Year1 premiums are not as important as year 11 premiums, as you no doubt have seen by now

They are not doing home or car loans – which normally constitute virtally all borrowings of a normal “healthy” client.

But they are lending.

So this is just another payday lender.

NO thanks! Starting OFF on a race-based footing (and with VBS which also had a strong racial slant, still uppermost in everyone’s mind) is a dead give-away of what is to come for bank customers down the line….

Probably the worst PR one can imagine!

Anyway, much rather go for Motsepe’s TymeDigital bank or Jordaan’s Bank Zero – no blatant racism present there!

End of comments.

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