Discovery CEO Adrian Gore moves from medical aid and insurance to banking on Wednesday as the Discovery Bank is launched in Sandton.
It is going to rain banks over the next few months as five banks – some new, some repackaged – hit the market.
Technology or financial technology (fintech) has brought down the barriers to entry and most of the banks will use the digital era to operate their banks, many without branches.
The new banks are targeting consumers across the market from the high-end to the unbanked.
Discovery Bank pivots on behavioural economics – it has used the Vitality programme to cultivate key learnings of what drives human behaviour. Discovery’s medical aid with the Vitality programme has shown that by linking rewards to improving health, they have altered how members behave.
Gore told Fin24, ahead of the launch, that the Vitality model has been shown to work “by using financial incentives and other behavioural interventions to ‘nudge’ changes in individual behaviour”.
And that Discovery’s experience with Discovery Card (it has about 300 000 customers) has indicated that the same model that uses financial incentives and behavioural interventions to change people’s behaviour – and which has been successfully applied in the health and wellness space – can also be applied to banking.
This model of reward-based banking is an innovation similar to FNB’s ebucks system which not only rewards consumption but also consumer behaviour.
Banks without branches
The passages into and out of retailers like Pick ‘n Pay as well as Boxer supermarkets are going to get a lot more crowded. Patrice Motsepe’s TymeDigital, which his African Rainbow Capital acquired full control of from the Commonwealth Bank of Australia earlier this year, has been in operation on limited service since May 2016.
The bank will operate through self-service kiosks in Pick ‘n Pay and Boxer Stores. Since May 2016, it has piloted its Money Transfer service and it has signed up just under 400 000 users, the new bank has said.
By last week, Bloomberg reported the bank had signed up 1 800 clients in the first week of an unofficial launch. In addition to technology, the CEO Sandile Shabalala said TymeDigital is going for a pay-per-transaction model rather than a bundled option.
Tyme’s account does not charge a basic monthly fee. Instead, clients pay for specific services as they use them, with the most expensive transaction in its fee structure, cash withdrawals at ATM’s of other banks, costing R8.
Bank Zero Mutual Bank is the brainchild of former FNB CEO Michael Jordaan and his colleague at the time Yatin Narsai. It is a purely app-driven bank. An app is an application which can be downloaded and transacted with.
The bank believes its offering will be attractive to the banked, the underbanked and unbanked.
Being app-driven, explains co-founder and executive director Lezanne Human, involves offering all services through an app as opposed to offering an app as an additional channel while forcing customers to go into branches and to use the internet to complete activities such as replacing cards and closing accounts.
Bank Zero’s other unique selling point, it says, is transparency.
Examples include that they would “at all times be aware of progress within a process” and that they would “know what’s happening in their accounts at all times".
Bottom of the pyramid
Two banks which are not new, but which are being refurbished for the market are Postbank and the African Bank. Both want to extend services and financial inclusion at the lower end of the market – or what economist Paul Collier calls the bottom of the pyramid.
African Bank was placed under curatorship in 2014 and subsequently split in two. The “good bank” became the new African Bank, which launched in 2016.
“We have never offered full retail banking services and [have] historically focused on unsecured lending. When the bank launched in April 2016, part of the strategy was to become a successful retail bank, which offered a variety of financial products and services,” says Neil Thompson, the bank’s head of customer value proposition and product design.
African Bank’s key offering is a family wallet where the bank will make it easier for multi-customer banking off a principle account.
Postbank, which has 6.2-million accounts, applied to the Reserve Bank for registration in June last year. According to the Reserve Bank, the application is being considered, pending amendments to the Banks Act, which would allow a state-owned company to be registered as a bank.
The acting MD Shaheen Adam says that Postbank has about R8bn in assets and investments. He says this money can be used productively in the economy by offering loans to small start-up businesses, small and medium-sized businesses and small agricultural operations.
He says loans available in the market are standard. “They’re all revolving credit facilities; all based on income; all run debit orders. There’s nothing really that’s being done to uplift people’s situation, in terms of saying: ‘Can I give you a loan so you can improve your outbuilding, so you can get more rental income [out of it]?’ as an example.”
Postbank has a big customer book, but it has grown substantially because 7-million grant beneficiaries are now paid by it after Net1 lost the contract to pay social grants.* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER