Discovery’s digital bank to go live next month

Discovery Bank Source: Google Images

Discovery outlined its dream with the “world’s first behavioural bank”. It is based on the “behavioural” model Discovery uses to reward its life and health insurance customers for their lifestyle choices.

Back in October 2016, Discovery received the green light from the regulators to set up a bank – the anticipation was that a banking licence would be granted within a year. It allocated ZAR 2.1 billion ($153 million) to the project, FinTech Futures understood at the time.

As part of that ambition, it acquired the majority stake in its credit card unit – Discovery Card – from FirstRand Bank. Discovery Card has 250,000+ customers.

In the latest development, Discovery says the test and run phase was satisfactory.

In its latest financial results – it says: “The public launch will be carefully managed, with priorities being the acceptance of retail deposits and migration of Discovery credit card clients to Discovery Bank.”

The firm says there is a “slight over-run compared with the original budget but costs are largely in line with expectation”. Its attention is currently on the card migration and retail funding strategies.

To the end of December 2018, a total of ZAR 6 billion ($432.7 million) has been invested in Discovery Bank. This comprises ZAR 3.28 billion ($236.5 million) paid to FirstRand Group; ZAR 1.31 billion ($94.5 million) regulatory capital invested in the bank and ZAR 1.42 billion ($102.3 million) incurred in Discovery Central Services on the build capital expenditure, test capital expenditure and hardware infrastructure.

In total, the company spent 21% of its total earnings in the six months ended December on new business initiatives that include the bank.

Discover the rivals

Discovery Bank will not be alone as a digital challenger in South Africa.

Bank Zero launched trials in October 2018. It was co-founded by former senior executives of FNB.

Earlier this month, TymeBank went live on a limited basis in preparation for a formal launch. It took its time.

The Johannesburg-based digital bank was officially founded in 2012 under the name of TYME. In 2015, it was acquired by Commonwealth Bank of Australia (CBA) and became TymeDigital.

Three years later CBA sold it to African Rainbow Capital, which describes itself as a “fully black-owned and controlled investment company”.

The majority shareholding of African Rainbow Capital makes TymeBank – as it is now known – “the first majority black-owned retail bank in South Africa”, the new owner says.