Ferial Haffajee: Can Adrian Gore disrupt the banks this time?

Ferial Haffajee (Gallo Images / City Press / Herman Verwey)
Ferial Haffajee (Gallo Images / City Press / Herman Verwey)

By last night, I had already signed up to join Discovery Bank, even though it only starts up in March next year. This was despite notification of another whopping increase in my Discovery medical aid tariff next year.

I’m a Discovery junkie, and it may not always be a good thing. That sign-up was, in hindsight, huge for me. I’ve banked with FNB for well over 30 years, ever since a kind manager at the Wits campus branch gave me a loan – but not before she sat me down and explained budgets, and why I was spending too much on fashion on the easy credit lines that retailers were handing out to students.

Maryna Fernandes (yes, I remember her name) changed my life then, and so I have stayed fiercely loyal, although other banks regularly come knocking.

I’m also loyal to Discovery, but I know their problems. Tariffs are sky high, because the state healthcare system makes us sitting ducks for private healthcare providers. Then there is the whooshing sound that your savings account makes as it empties out, far too early in the year. I am horrified by stories of Discovery's tight-fisted medical-aid managers, who can stand between life and death. There are member groups who raise hell about the fact that the company, Discovery Health, may be charging the underlying medical aid scheme too much.

Why, then, this loyalty? I enjoy my subsidised gym membership, which comes with being a Discovery Vitality client; I like that I am healthier because of Discovery; they pay out claims quickly.

And I am fiercely competitive, so the fact that I have just made Diamond on the Vitality programme is a badge of honour. Go figure. I don’t bother with the rewards, but I do like being a black Diamond. Vitality awards status on health points you achieve from going to the gym or running, walking and having regular health and fitness screenings.

Yesterday, Discovery CEO Adrian Gore launched Discovery Bank. It’s an audacious move, and to make a political comparison, this is a bit like Julius Malema going off to start the EFF after his life in the governing ANC. Gore’s aspirations to up-end medical aid were part-funded by RMB, and the Discovery Card – held by 300 000 clients – is a joint venture with RMB.

Last week, Gore and other Discovery directors bought the card back from RMB, giving the new bank an existing customer-base of 300 000, plus the two million Discovery members to whom the bank’s services will be marketed. FNB is very worried, I understand. A former FNB CEO, Michael Jordaan, will also launch Bank Zero in the new year.

I like swag, so one of the reasons I signed up is because you will get a cool purple vertical card when you do. We don't swipe horizontally any longer, so the new card is intuitive.

The underlying philosophy of the bank is different. It will incentivise, by Vitality rewards, five good behaviours: to spend less than you earn; to save regularly; to insure; to pay off your property and to invest for the long term. Discovery’s team of actuaries have found that these five controllable behaviours can mitigate three typical risks facing South Africans which are to have unaffordable debt, are exposed to unexpected expenses or loss of income, and have insufficient income in retirement.

So, the bank will encourage good financial actions – this is why it’s billed as the world’s first behavioural bank.

While Discovery is targeting relatively affluent customers, membership is open to anyone with a smartphone. It took Discovery Bank CEO Barry Hore less than five steps to open an account when he demonstrated at the banks’ launch on Wednesday.

While there is a correlation between affluence and good financial management, it’s not absolute. "…[T]he distribution of measures of financial health by income groups are wide and overlap substantially, highlighting that a person’s financial health does not only depend on earnings – consequently, but individuals can also be relatively financially healthy without necessarily having a high income," says a paper that explains the bank's founding ethos or economics.

Discovery Bank is only starting in March next year, so it has not yet revealed its cost or fee structure. That means comparisons are difficult, but the new bank’s plan is to make us spend less, not more. And banks' reward systems are generally built on getting you to take out more credit, meaning to date, they have not really incentivised saving. 

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