Discovery and TymeDigital set to Launch Digital Banks in South Africa
In September 2015, Discovery announced its intention to launch a bank. Fast-forward two years, and Discovery has obtained a banking licence.
Discovery has a track record of achieving success by taking an unconventional approach and differentiating themselves from competition. One can be reasonably certain that this will be the case for Discovery Bank as well. What we know for certain is that the bank will be branchless and target the higher end of the market, i.e. LSM 8 and above. In a similar way to how Discovery Health incentivises people to live a healthy life, it is expected that Discovery Bank will encourage people to save more and pay off their debts. For example, one can expect lower banking fees and interest charge on loans for displaying healthy financial behaviour.
Discovery follows in the footsteps of TymeDigital, which obtained a banking licence in September 2017. TymeDigital is owned by Commonwealth Bank of Australia (“CBA”), the largest listed company on the Australian Securities Exchange. ARC, the investment vehicle of Patrice Motsepe, is their BEE-partner and minority investor. CBA acquired TymeDigital with the aim of building a full-fledged digital bank in South Africa. Its aim is to provide affordable and accessible banking services through a growing network of partners. One such partner is Pick ‘n Pay, whose Point of Sale serves as a TymeDigital access point for money transfer services (TymeDigital’s only major operating business thus far). Increasing financial services awareness and financial education is an essential part of its plans to grow the market in South Africa and win customers. While Discovery Bank and TymeDigital will both be branchless, TymeDigital will target low-income earners and SMEs, while Discovery will target high-income earners (those who earn an annual income of at least R300 000 per annum). Both digital banks aim to launch by June 2018.
Discovery are already familiar with the behaviour of their banking target market as they currently service this market via other financial products (medical aid, insurance, etc.). Servicing an additional financial need through the same brand brings Discovery one step closer to servicing the full client life-cycle, and gaining from the synergies of doing so. An example of this is Discovery having already correlated peoples’ spending habits against their Vitality status.
Discovery will invest R2.1 Billion into this new venture, which already has a staff headcount of around 350. This new business will be headed by Barry Hore, a former Nedbank and SARS executive.