Discovery Bank is testing its capabilities with live testing of system infrastructure, operating processes, and regulatory engagement. This is according to the company’s interim results for the six months ended 31 December 2017. Discovery has spent R1.2 billion on Discovery Bank, and this is expected to reach R1.5 billion by launch.
Discovery CEO Adrian Gore previously said South African banks are worried about Discovery’s entrance into the market, as it will be disruptive. “The value proposition itself will be good for customers. I mean, that is what we do,” said Gore.
He said using incentives to change behaviour works well, and they can add value with their model of sharing value and creating behaviour change.
Discovery Bank will target the “mass affluent market”, which Gore said covers “a low LSM right the way to the top”.
The company confirmed that it has received its banking licence, along with:
- National Credit Act approval, for the advancement of credit to the public.
- South African Multiple Options Settlement, which allows transactions with other banks in South Africa to be settled.
- SWIFT approval, which allows it to transact on the SAMOS systems with the SARB.
- Payments System of South Africa approval, letting it conform to the rules necessary to process specified payments.
- Visa Principal Issuer licence, with Discovery Bank receiving unique six-digit BIN-numbers for both credit and debit cards.
- Restricted Authorised Dealer in Foreign Exchange approval, granted by the Financial Surveillance Department.
Discovery will launch its banking offering to the public during 2018.
Now read: Discovery Bank will be disruptive
South African banks are worried about Discovery’s entrance into the banking market, as it will be disruptive. This is according to Discovery CEO Adrian Gore, who was speaking to Forbes Africa about their banking plans. In October, Discovery received its banking licence from South Africa’s Registrar of Banks.
This paves the way for the company to launch commercial banking services in South Africa in 2018. Discovery has been working on its bank for two years, and Gore said it has progressed well. They now have a strong team of people on the project and the company is already interacting in the payment space.
The Discovery Bank is being built from the ground up, and around R1.5 billion has been invested in the project. Gore said the investment is needed to ensure they build the best platform to serve customers, without taking any shortcuts. “The value proposition itself will be good for customers.
I mean, that is what we do,” said Gore. He said using incentives to change behaviour where people are often irrational works well, and they think they can add value with their model of sharing value and creating behaviour change. Discovery Bank will target the “mass affluent market” in South Africa, which Gore said covers “a low LSM right the way to the top”.
Gore said their focus is on customers and offering them a value proposition which makes sense.
“It is simple – if you meet people’s needs, they buy your products.”
Now read: New Discovery Bank on track
Discovery has received authorisation from the Registrar of Banks to establish banking operations in South Africa, and is on track to launch its banking products next year. This is according to Discovery CEO Adrian Gore, who said they are deep into the preparation phase of the new bank. Gore said it is a complicated process to assemble the right team, build the systems to support the bank, and develop products which clients need.
Despite the complications, he remains upbeat about the prospects of Discovery Bank – saying it is an exciting project. “We need to meet the needs of our customers. I think we can.
We have strong ideas and convictions about that. If we can do that, the market will tell us,” said Gore. Discovery announced its plan to establish a retail bank in 2015, which will compete against Absa, FNB, Nedbank, Capitec, and Standard Bank.
Gore said they had tremendous success with their joint venture with FNB on the Discovery Card, which provides them with a launch pad for full banking services. “We’ve got the capital, we’ve hired bankers, we’re building substantial systems. We want to make an offering that’s relevant and can win market share,” said Gore.
Discovery has an advantage over the big four traditional banks, as it does not have to maintain a country-wide network of branches and ATMs. This means Discovery Bank’s costs will be lower than its competitors. Former FNB CEO Michael Jordaan, who was behind making FNB the most innovative bank in the world, said the Discovery Bank has great potential.
“I think that Discovery Bank has the potential to be a big disruptor and a huge success, as it has been in other pockets of the financial services industry,” Jordaan told MyBroadband.
Jordaan told Business Times that Discovery can use its lower cost base to offer clients lower banking fees and better interest rates.