DISCOVERY BANK: Health, wealth and wisdom
By September, the eagerly awaited launch of a new SA bank will go live. But it won’t be easy.
"We don’t have any illusions. We know how difficult it is to persuade people to move banks. The established banks are super strong and there are a number of disrupters," says Discovery CEO Adrian Gore.
Gore announced the intention to form Discovery Bank two years ago. It will be part of the R114bn market cap of Discovery Group. Prelaunch spending will reach R1.5bn.
In an interview, Gore said it would have been simpler to go into a joint venture, perhaps with FNB, which currently operates the Discovery credit card. Instead, Discovery chose to build the bank from the ground up.
"This is certainly the most complex business we have ever gone into, and the most hotly contested space," says Gore. "We have done a great job at the plumbing.
"We have now got to get interest from the public."
In practical terms, the first of Discovery Bank’s products will be its existing credit card book, but Discovery can only buy it from FNB after it obtains competition commission approval. It is already a Visa principal issuer with its own bank identification number, and it can settle transactions with other banks.
It has been approved by the national credit regulator to be a lender and is an authorised dealer in foreign exchange. It will, from day one, be able to offer cards, secured and unsecured loans, transactions with other banks and foreign exchange.
Other disrupters to the banking sector won’t make Discovery’s launch easy. These include TymeDigital by Commonwealth Bank of Australia, and former FNB head Michael Jordaan’s Bank Zero.
But Gore says Discovery has a specific shared-value approach and a core target market in the mass affluent sector. Its targeting of wealthy clients — many of whom already use Discovery medical aid — will set it apart.
Gore won’t say if bank customers will be given the chance to join the medical aid’s Vitality programme. But it must happen: the depth of information embedded in the loyalty programme can help Discovery manage its client base more effectively.
There is a hint of Discovery’s new direction in an advertising campaign for its upmarket Purple products. This was originally just an "invitation only" credit card, but it has now been extended into a range of elitist life, short-term insurance and investment products.
Gore says the bank is unlikely to break even for five years, but its indirect contribution will be immense.
It will enable the group to cross-sell between the bank, insurance and medical aid bases.
Like other disrupters, the bank is not expected to develop a branch network; it will be technology-led with the main focus on mobile. For marketing reasons, however, it will probably commission some ATMs in high-traffic areas.
There will soon be an exhibit of the bank’s capabilities (a mini-branch, in old language) at the new Discovery head office in Sandton.
The bank will be led by Barry Hore. In the early 2000s, Hore revamped Nedbank systems under the somewhat controversial then CEO Richard Laubscher. Hore worked at the SA Revenue Service until 2014.
Discovery is more than capable of funding the new bank, with R6.1bn cash generated in the six months to December, it said at an interim results presentation. About 75% of the operating profit is still provided by the two oldest businesses, Discovery Health and Discovery Life.