The relentless tide of the consumerism has meant disruption for every industry, with clients demanding more in exchange for their business. Nothing more so than the demand for new, more ethical ways to do business, whether it’s with fair trade, employee policy or environmental sustainability.
Now the tide is turning towards banking. What if the new generation of banks could make us better with money – and better citizens too?
The need for new ways
When Discovery first announced it would be launching a banking solution, you may have wondered, “Does South Africa really need another bank?’
Indeed, the country boasts an innovative, world-class banking sector with great product offerings. As the old Monopoly saying goes, ‘the bank always wins’, but dig a little deeper, and clients’ bank balances tell a different story.
A financially stressed nation
South Africans continue to be big borrowers and inadequate savers. Roughly 53% of South Africans borrowed money in 2017. To put that in perspective, only 37% of Botswanans borrowed in the same period, while the world average was 47%.
About 86% of South Africans do not have any or adequate retirement savings or plans. Despite tougher affordability requirements, credit use is outpacing employment growth, and a disinclination to save is leaving people significantly exposed. Reducing indebtedness and creating a savings culture in South Africa are socio-economic challenges that face both individuals and society as a whole.
The battle of the banks
“This is where Discovery Bank seeks to transform the economy – one financially-savvy citizen at a time. Hopefully, when the many benefits of behavioural banking become obvious over time, we will help to create a ‘new norm’ where banking clients don’t just store their money, but fast-track their wealth by becoming increasingly better at managing it,” Akash Dowra, Head of Technical Marketing at Discovery Bank.
Poor money habits are holding us back
“Most people believe that their money troubles can be solved by simply earning more. Our research indicates that financial health is more closely linked to behaviours than income -10.4% of individuals earning more than R1 million per year achieved a financial health score typically associated with having difficulty in making ends meet – versus 13.3% of individuals earning less than R250 000,” Dowra adds.
Discovery Bank believes that good financial decisions are as a result of thinking about money correctly and exhibiting more positive, and less negative, money behaviours. In fact, most can be addressed through five simple changes of habit – spending less than you earn, saving regularly, insuring for adverse events, paying off property, and investing for the long term. Through these, people can materially improve their financial position and reduce the risk of not being able to meet their financial obligations.
These principles can be taught growing up, but can also be learned as the result of better habits. But just understanding the dire need for these good behaviours, and even how to incorporate them into your daily lifestyle, is intrinsically tied to good financial literacy.
According to the OECD, just 30% of South Africans are adequately financially literate, compared to 48% of Brazilians and 77% of Koreans.  This highlights the need for institutions like banks to teach it through practise.
The power of positive reinforcement
There’s a delicate balance between abandoning clients to their self-destructive behaviours and a system which urges lifestyle changes ‘for your own good.’ But research shows that the answer may well lie in positive reinforcement – compelling rewards for consumers when they display positive, self-improving behaviours, and a ‘FOMO-inducing’ lack of rewards when they don’t.
Visit the Discovery website for more information: https://www.discovery.co.za/bank/bank-healthier
Discovery Bank is an authorised financial services provider.
This post is sponsored, written and provided by Discovery.