Discovery Bank went live to the general public in July last year, and there was immediately a great deal of interest in the different accounts and fees on offer, and how they compared to the other major banks.
There was a rather embarrassing blip in October, when Discovery Bank discovered a major security flaw, but that issue was quickly shut down.
Now that six months have passed, the bank is reflecting on its growth thus far, saying it “performed ahead of expectation, across all areas of the business” in the six months preceding December 31.
Moneyweb unpacks the numbers below:
As at February 18, Discovery Bank had 78 000 active clients with 180 000 accounts, nearly half of which it points out “had never held a Discovery Card before”. Contrast this with the 22 000 customers it had signed up in the first three months after launch in July.
Three quarters of its customers are on bundled accounts (transaction account plus credit card); 40% of its customers hold Black accounts, 35% Platinum accounts and 24% Gold accounts.
These customers have deposited a total of R1.2 billion… [and] Total transacted over the last eight months is R2.6 billion, and Discovery says its customers spend three times the market average.
Discovery’s success relies heavily on Vitality Money, which works in much the same way that your Discovery Vitality Active rewards work.
Work out, keep fit and shop for healthy food and score rewards, and ‘bank healthier’ and you benefit from flexible interest rates on savings and credit accounts, as well as scoring additional Vitality discounts and cashback.
Whilst numbers have been positive thus far, the long-term success of Discovery Bank requires significant further migration by customers of other banks:
The fundamental question Discovery poses is whether it can build a retail-heavy bank of scale? It has said it needs “roughly 500 000 to 600 000 clients” to break even.
Key to future client growth will be using its advisor channels to ‘sell’ bank accounts. Without the physical footprint of branches, this channel is critical. It says 1 300 tied agents and 4 500 independent financial advisors (IFAs) will start actively selling accounts in the second half. Nearly half of the former Discovery Card base was ‘sold’ the account through the “advisor distribution channel”.
Discovery says priorities for this year include “simplifying the Vitality Money user experience and streamlining the service environment and online support functionality”
As long as “actively selling accounts” doesn’t mean cold calls, because we have more than enough of those to deal with already.
Seriously, I’m not interested in what you’re offering. Send an email that I can ignore in peace, please.
Further competition in the banking sector is always welcome (although Seth seems locked in with FNB), especially if keeps the established banks thinking on their feet.
Just the half a million or so customers to go and Discovery will join those ranks.
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