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Innovation reigns supreme as insurance meets banking

19 November 2018 Jonathan Faurie

Over the years, the shared value approach has proven to be a successful business model for Discovery.

This success hinges on the fact that Discovery feels that its policyholders will manage their risk better if they are provided with an incentive to do so. 

Following on from Vitality Drive and Discovery Vitality, the company announced on 14 November that its shared value approach will be central to Discovery Banking which is currently in beta testing. 

Behavioural change

Upon launching Discovery Bank, Discovery CEO, Adrian Gore, said that there is a significant opportunity to improve the financial health of South Africans. 

“Reducing indebtedness, including the inappropriate use of short-term credit and creating a savings culture in South Africa, are major socio-economic challenges facing both individuals and society as a whole,” said Gore. 

He added that this behavioural change is predicated on five ways that South Africans can become financially healthier. “South Africans should spend less than they earn, they should save regularly, they should insure themselves against adverse events, they should pay off their property as soon as they can, and they should invest for the long-term,” said Gore. 

Shared value

Gore said that through its experiences with Discovery Vitality, the company feels that those who manage their Vitality Points effectively manage their risk appropriately. These are the clients that Discovery want to target. 

Essentially, Discovery Bank clients will be placed within a specific status, like they are on Discovery Vitality. Each status will offer specific benefits. As clients manage their wealth better, they will move up to the next status where better benefits will be offered. 

The Discovery Bank Statuses will be: blue, bronze, silver, gold and diamond.  

As people manage their finances better, they will once again be offered discounts at participating retailers as well as what Discovery calls Dynamic Interest and Savings Rates. These are rates that are based on specific behaviours and will be significantly different to the rates offered by other banks. 

Dynamic rates

“We believe that we have created a concept that is quite profound. Currently, the interest rates that you pay as a bank client is opaque. You apply for a loan and the bank decides on the interest you pay based on your risk profile. We are trying to democratise the issue through Dynamic Interest Rates. A Vitality Bank client will be offered a market interest rate on the lowest Vitality Bank Status. As they move up from one status to the next, they will be offered a lower rate,” said Gore. 

Discovery Bank will also be encouraging saving. “The better our future clients will manage their money, the longer they will stay with us,” said Gore. He added that as clients save more, they will move up the status curve and will be offered better interest rates on saving. 

The nitty gritty

Discovery Bank will be unique in the South African context in that the bank will be fully online but will be led by an omnichannel offering. Currently, Discovery Bank plans to open only one branch, but clients will be able to draw cash through any automated teller machine or any till points that the public can currently draw cash from. 

Discovery Bank will initially only be a transactional bank and will offer a credit card as well as other transactional accounts. Gore said that Discovery Bank will not initially offer products such as vehicle or home finance, but he did not rule out offering this in the future. 

There was also a mention of equity that Discovery is planning to give away to black depositors. We are currently following up on this and will give you more information on it as soon as we get feedback from Discovery. 

Editor’s Thoughts:
It will be interesting to see Discovery Bank’s final offerings when the products are released next year. The questions is, will Discovery Bank be innovative enough to gain major traction? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.

Comments

Added by Nancy Bowring , 19 Nov 2018
I’m beginning to feel like a non-black
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Added by Lenie Blignaut, 19 Nov 2018
The last sentence is exactly my point, why only for black depositors? The reason that they must become more BEE is just not a good reason enough. I feel that Discovery is only interested in black depositors and don't want any of the other races in South Africa to deal with them. Thus I will not interact with the bank, it will be a no go for me.
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