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Two years after launch, Discovery Bank hits 1 million a...

Business Maverick

BANKING INDUSTRY

Discovery Bank hits 1 million accounts, launches gym and airport lounge benefits

(Image: Supplied)

New products announced this week by Hylton Kallner, the chief executive of Discovery Bank, include Vitality Pay As You Gym, and a partnership with SAA that will see Discovery Bank clients able to access The Lounge at OR Tambo, King Shaka and Cape Town International airports.

Just two years after its official launch, Discovery Bank has hit the 1 million accounts milestone, with more than 450,000 clients, more than R11-billion in deposits and R4.5-billion in credit advances. 

Having started life as a medical scheme administrator, Discovery then branched into the insurance market, offering short-term and long-term insurance. In its latest growth spurt, the company spawned Discovery Bank two years ago and, true to form, the latest offering is also well entrenched in the company’s “shared value” model. 

When the bank launched, the chief executive of Discovery Holdings, Adrian Gore, said research showed that banks tend to compete on three dimensions: fees, interest rates and rewards. Discovery’s research at the time showed that the traditional banks tended to compete on fees and rewards while the newer entrants competed on fees and interest rates. 

“We initiated a study of over 12,000 customers encompassing 600,000 transactions. We found that fees don’t equate to costs, and there is no such thing as free banking. Fees depend on what services the customer uses over time and are poorly understood,” he said. 

Discovery’s study also showed that bank charges amount to, on average, between 0.3% and 0.6% of people’s salaries. 

“While this is material, managing the other 99.5% is crucial,” Gore said, adding that is where Discovery Bank’s primary focus would be. 

“By changing behaviour, we can create economic value that funds incentives, and this should enable us to compete on fees, interest rates and rewards, with emphasis on changing behaviour leading to higher incentives and rates of interest.” 

Hylton Kallner, Discovery Bank CEO.

New products announced this week by Hylton Kallner, the chief executive of Discovery Bank, include Vitality Pay As You Gym, and a partnership with SAA that will see Discovery Bank clients able to access The Lounge at OR Tambo, King Shaka and Cape Town International airports. As an introductory offer, Discovery Bank clients will have unlimited access to these lounges for the rest of the year. 

Following the spectacular collapse of Kulula recently, Discovery Bank has partnered with SAA and CemAir, and also offers discounted flights via Safair, Airlink and Lift. 

The Pay As You Gym benefit will be available to all Discovery Bank clients at a cost of R75 to R100 a workout, depending on which gym you access. To get clients moving, Discovery is opening up the offer with unlimited free access at Virgin Active and Planet Fitness until the end of July, with a free smoothie after your first gym visit. 

Bank Zero

Another new bank is Bank Zero, which was launched in August last year. While the bank was mum on how many clients have signed up, its chief executive, Yatin Narsai, says the typical customer currently joining the bank is more active than expected. 

“Customers’ deposits are higher, average balances are higher and average transactions per customer are more in volume and larger in value. This could possibly be due to the nature of typical early adopters, but it also speaks to the huge need in the market for powerful, innovative business banking at zero cost. We are seeing proportionally more businesses joining us than what we initially expected,” he says.  

Narsai says the bank has no plans to introduce a loyalty programme because loyalty programmes add costs, which customers “definitely end up paying for”. 

“Recently, banks have started offering entry-level accounts at zero fees/low costs, but these customers are then forced to start paying more for their accounts when needing to access better functionality.” 

Narsai points out that fees are often hidden, saying there’s a difference between a “zero monthly fee” account versus an account with “zero fees overall”. 

“A number of banks advertise the former fee option, but then hide fees in EFT charges and other fees. Bank Zero’s account is the latter option, with all EFTs, debit orders, etc, free. When all fees are zero, the cost of a loyalty programme can no longer be hidden away,” he says. 

Discovery Bank hits 1 million accounts, launches gym and airport lounge benefits
Discovery offices in Sandton, South Africa. (Photo: Gallo Images / Alet Pretorius)

“Once a bank has started offering a loyalty programme, it becomes almost impossible to discontinue it without creating brand damage. And by continuing the loyalty programme, the costs continue. This means that the rules keep changing and become more complex every year. We believe in full transparency and simplicity – which jars with the complex rules of loyalty programmes.”  

Meanwhile, TymeBank has opened 4.95 million accounts to date and offers clients a value-add through a partnership with Pick n Pay. Every TymeBank Visa debit card works as a Smart Shopper card so TymeBank customers earn Pick n Pay Smart Shopper points whenever they swipe their TymeBank debit card. DM/BM

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