Major South African bank gets royal seal of approval

Discovery Bank has been acknowledged by UN Special Advocate for Financial Health, Queen Máxima of the Netherlands, for its work in improving financial behaviour through tis Vitality Money programme. 

Queen Máxima met with Discovery Bank CEO Hylton Kallner in Cape Town as part of her three-day visit in South Africa to support the private sector and policymakers improve the financial health of the country’s citizens. 

Since launching with just a credit card in November 2018, Discovery Bank has rapidly expanded its offering to become a full-service digital bank. 

It has reached the key milestone of one million clients two years ahead of schedule and is now profitable, greatly reducing its reliance on Discovery as a group for funding. 

One of the key differentiators of the bank’s offering is its use of Discovery’s shared-value model through the Vitality Money financial wellness programme. 

This programme, in essence, tries to incentivise individuals to make better health and financial decisions through subtle nudges and rewards. 

Queen Máxima gained interest in Discovery Bank through this programme, which has the ability to encourage behaviour change among clients through science-based nudges and financial rewards. 

The shared-value model aims to create a win-win for clients and Discovery, with better financial behaviour rewarded with lower interest rates on loans or boosted savings rates. 

For example, Discovery Bank’s new home loan product rewards good financial behaviour with a lower interest rate on clients’ mortgages.

The behaviours that are rewarded include saving, being adequately insured, investing for retirement, and paying off home loans faster. 

Discovery Miles is designed to provide an immediate reward for behaviours that benefit clients in the long term, effectively bringing forward gratification.

People fall off the wagon and take the path of least resistance for immediate gratification – whether having an ice cream, a piece of chocolate, or scrolling on social media. 

To help members make long-term behavioural changes that will benefit their health, Vitality has “got to trick the brain” by bringing rewards typically felt in the long term into the present.

Longer-term rewards, such as free flights with Vitality Travel, are used to ensure the sustainability of good habits.

Discovery Bank throwing out cash

Discovery Bank’s recognition comes after its strong set of financial results for the six months ended 31 December 2024, where it reached profitability ahead of target. 

The bank is pivotal to Discovery’s next phase of growth, with the financial services giant planning to grow its profit at an annual rate of between 15% and 20% as it cuts spending on new businesses. 

This is heavily reliant on the bank being sustainably profitable and not requiring significant capital from the group for its continued growth, freeing up cash flow and enabling Discovery to pay down its debt and improve its return on equity. 

Ultimately, it ensures that Discovery can maintain its long-term view and be unfazed by short-term fluctuations in economies and markets. 

“We are not a trading company. We are operators. We do not make trading decisions for short-term wins. We make operating decisions for the long-term future of Discovery,” CEO Adrian Gore has explained to Daily Investor.

Gore said the bank has broken into profitability and already requires far less capital from the broader group to operate.

Kallner told Daily Investor that he expects the bank to only require funding from the group, at a significantly reduced level, for one more financial year. 

While the bank hit monthly operational breakeven in early 2024, this excluded new business acquisition costs. Now, the bank generates enough capital to fund its own expansion, freeing up significant cash flow at a group level. 

“The bank has been operational break even over the last six months or so. Now, it has broken into profitability completely. So it is simply throwing out cash,” Gore said. 

For the six months, the bank slashed its loss in half to R145 million and managed to sustain its run rate of over 1,200 daily sales per business day. 

Its client base grew by 32% to 1.1 million, with each individual having over two accounts with the bank. Deposits grew 27% to R21.2 billion, while advances shot up 37% to R7.8 billion. 

“I mean, basically, the bank shot the lights out,” Gore said.