The South African digital bank taking on the Big Four

Discovery Bank is showing strong growth and is taking the fight to South Africa’s Big Four banks – Absa, Standard Bank, Nedbank, and FNB.

Discovery Bank launched on 14 November 2018 and is marketed as the world’s first fully digital behavioural banking platform.

It was created to disrupt South Africa’s banking industry by using Discovery’s Vitality platform and by offering wealthy clients superior service.

Discovery’s latest annual results showed that the strategy is working and that the new digital bank is achieving its targets.

Discovery Bank increased its customer base to 958,000 in 2024 and increased its banking revenue from R213 million to R2.1 billion in four years.

Another positive sign is that the bank has been able to cut its operating costs per customer as it has scaled its customer base.

The annual operating cost per client has fallen from R5,017 to R2,737, which bodes well for its path to profitability.

At the same time, the bank has increased its revenue per client from R777 to its most recent level of R2,259.

Therefore, Discovery Bank is generating more money per client and is also spending less to serve each client.

This trend is exactly what any bank wants to achieve, as it will produce increased profits and cash flow in future.

Discovery’s latest financial results revealed that Discovery Bank was still reporting an operational loss.

This is not unexpected and was well within Discovery’s estimates when it launched its bank six years ago.

More importantly, Discovery Bank has been able to narrow its losses to such an extent that Discovery CEO Adrian Gore expects it to be profitable in the next financial year.

In 2020, the bank reported an adjusted operating loss of R1.18 billion. This figure improved to a R454 million loss in 2024.

Discovery Bank continues to expand its offerings to clients. At the beginning of 2024, for example, it started offering home loans.

Its home loan offer is unique because clients can receive lower interest rates for exercising healthy financial behaviour.

Since the home loan launch, Discovery Bank has already approved home loans valued at R617 million.

The bank’s loans and deposits have increased substantially, with retail deposits of R18.5 billion and loans and advances of R6 billion.

Discovery Bank is not slowing down. It has set itself a target of reaching two million banking clients by 2029.

In addition to doubling its current client base, the bank aims to make a R3 billion profit within the next five years.

Discovery Bank’s offering is unique, and it has shown that it provides an attractive alternative to the Big Four traditional banks.