The South African bank rich people love

Discovery Bank has emerged as the best banking brand in South Africa. The company’s focus on the experience of its high-quality client mix has paid dividends. 

Discovery Bank has gone from strength to strength since launching in November 2018 with only a credit card. 

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

As the bank has steadily launched new products, its revenue has skyrocketed, and has neared profitability. The bank achieved operational breakeven in the second half of its recent financial year. 

CEO Hylton Kallner attributed this success to the bank’s attracting high-quality clients and bringing new products to market. 

Kallner also said in an interview with Daily Investor that the bank has an intense focus on client experience, with the quality of its banking app, as a digital-only bank, being crucial. 

“The actual digital experience is something that we are focused on. It is something that we continuously look to improve and enhance,” Kallner said. 

A major part of this is not necessarily ensuring everything is perfect when launched but being agile and reacting to client feedback or needs. 

Kallner also said an often-forgotten part of being a digital bank is offering human support for clients’ issues and ensuring these problems are dealt with in the best manner possible. 

“So it is digital on the one hand, having every feature and product available on the app. And then, on the other hand, having immediate access to brilliant bankers and human support whenever you need it.” 

This has been borne out in various indices tracking sentiment towards South African banks, with Discovery Bank dominating the AskAfrika Orange Index for 2024/2025. 

DataEQ’s South African Banking Sentiment Index for 2024 also has Discovery Bank at the top, ranking first in both operational and reputational performance. 

The Index provides an in-depth look at how consumers perceive the country’s eight biggest banks and is based on a dataset of more than three million public social media posts between September 2023 and August 2024.

Discovery Bank has seen a steady increase in its net sentiment scores since 2020. This year, for the first time, Discovery Bank took the top position in overall net sentiment at 47% – 27 percentage points above the industry average.

“It’s good to see that, overall, the banking industry remains the best-performing industry in terms of public social media sentiment amongst South Africans,” Kallner said.  

“From Discovery Bank’s perspective, we want to know how our clients feel and what is affecting them, so these insights from DataEQ offer significant benefits. Social media enables us to engage directly and in real-time with our clients and the broader public.” 

Discovery Bank has also greatly expanded its product range to go toe-to-toe with some of South Africa’s biggest banks. 

A major opportunity for the bank and a key part of its future growth is its home loan product, which promised to disrupt South Africa’s R1.8 trillion mortgage market. 

South Africa’s home loan market is currently dominated by the country’s ‘Big Four’ banks – Standard Bank, FirstRand, Nedbank, and Absa – which finance around 90% of all mortgages. 

In an interview with Daily Investor, Kallner said the bank has very conservative targets, which are in line with its plan to maintain a high-quality, low-risk client base. 

“Given the growth of the bank and our deposit base, we have got fairly good runway with this product,” Kallner said.

Discovery Bank’s main advantage comes from leveraging its shared-value banking model to help clients reduce the interest rates on their home loans. 

“The unique nature of home loans means client and asset risk typically reduce over time,” Kallner said.  

“With high costs negatively impacting repricing or switching to a different bank, an estimated 60% of clients are overpaying on their existing home loans today.” 

For the home loan product, Discovery Bank clients can reduce the interest rates they pay on their mortgage by up to 1%. 

Kallner revealed to Daily Investor that, based on the ability so save significant amounts of money on a home loan with the bank, it has been able to take clients from its competitors. 

Over 80% of Discovery Bank’s home loans come from clients switching their home loans from an existing provider to the bank. Only 20% are new home loans. 

Kallner said this percentage of new home loans has even exceeded the bank’s expectations as it was not their intention to bring in a significant number of new home loans. 

The bank also has an advantage over its larger competitors – its high-quality client base. Most of the bank’s clients are classified as low risk or exceptionally low risk, with almost none of its new business coming from high-risk clients. 

As such, it is not exposed to the headwinds associated with high interest rates in the same way as some of its peers are. 

This results in the bank also having tight lending standards and leveraging its shared-value model to lower the risk of its clients. 

In the company’s latest interim results, its deposits were around three times greater than its loans and advances – reflecting a very conservative approach to lending. 

Its deposits grew 31% to R16.67 billion, while advances rose by 20% to R5.75 billion. 

Thus, while the bank’s peers, particularly the Big Four, have been hit by a sharp rise in non-performing loans, Discovery Bank has kept this under tight control.