Innovation Fuelled by Societal Needs – Discovery Bank
Discovery Bank was launched in a challenging economic space. As always, in such environments, there is always opportunity. If you launch something positive in difficult times, people are drawn to it and it’s easier to differentiate. We built Discovery Bank to be different from the outset – having a clear goal in mind to create a bank that does not fit the generic mold of banking but one that operates in an elevated category – a shared-value bank. Our business model: Discovery’s success lies in our Shared-value Insurance business model (with the Vitality health, drive, and money behaviour-change platform at its base) that moves beyond meeting customer needs to addressing fundamental societal needs. A healthy society creates healthier businesses and leads to a virtuous or self-reinforcing cycle of business, individual and societal benefits.
WHY DISCOVERY LAUNCHED A BANK:
- Discovery started off with a core purpose – a simple intention to make people healthier and enhance and protect their lives. Beginning with health, and then moving into different branches of insurance, this core purpose remains central to its strategy.
- South Africans face a similar challenge with finances that they do with their health: 86% of South African’s cannot afford to retire and maintain their current standard of living, secondly South Africa has one of the lowestsavings rates in the world. South African’s save on average of 0,3% of their income, compared to 5% that Americans do, and 37% that the Chinese save.
- Good financial decision making is largely agnostic to income level. Our research demonstrates that financial health is less about income level and more about how individuals manage their money.
- Discovery Bank believes that banking practices can be learned – just like the habits of exercise/ physical activity or driving safely, and changing five controllable behaviours – spending less than one earns, saving regularly, insuring for adverse events, paying off property, and investing for the long term – individuals can materially improve their financial position and reduce the risk of not being able to meet their financial obligations.
DISCOVERY’S METHODOLOGY TO INNOVATE:
In every product and in all parts of the business, understanding and involving the customer is the key to making things work. Innovation starts with:
- Our values and core purpose, this is: To make people healthier and enhance and protect their lives / changing people’s behaviour through financial services that place what’s good for people first (managing health and wellness, driving behaviour and money).
- Having a vision to stay ahead of or make a positive impact on societal trends that we identify – wellness and health (healthy ageing and behavioral risks), economic stability (liquidity and financial strength), digital acceleration (big data, platforms, virtual work, and rapid adoption), “I vs We” (purpose and solidarity).
- Finding the solutions with the end goal in mind and then creating businesses and products that address these societal trends to have a positive impact on people and on society.
THE CRUX OF THE MATTER
The COVID-19 pandemic has transferred the way consumers transact and interact with their bank; The lockdown and COVID-19 infections have changed what we value and spend on;
- Spend on home improvements has increased;
- Savings levels have increased across income bands; as individuals prioritised their financial wellbeing.
- Spend that shifted online due to lockdown has not reduced to stores;
- 20% of spend is online vs card present;
- Consumers want convenience, tap and go payments have risen by close to 50% compared to 9 months ago, and we see significant take up of payment options such as Apple Pay
- Customers prefer real-time payments where it is economicalwe have seen a 57% increase in online payment year on year;
- We are also seeing clients globally becoming more comfortable with digital banking where the convenience and benefits are overwhelming. Globally, only 15% of UK population believe they still need their bank branch – and we are seeing similar trends with our clients.
- Travel spend declined significantly due to COVID – however we see this recovering quickly due to pent up demand from the vaccinated.
- Spend on apparel and accessories remains sluggish, as demand diminished during the pandemic.
BRANCH NETWORKS HAVE BEEN ON A RAPID DECLINE
COVID-19 has accelerated longstanding consumer and business shifts away from the bank branches and toward digital banking channels.
More than 6 000 bank branches have closed in the UK in the past six years, and we have already seen local banks announce closures here.
Assuming that digital channels become the default sooner than previously expected, the role of the branch could become obsolete in the very near future. That said, people will always have a need to interact with people, and therefore, banks have to find innovative ways to combine technology, the shifts towards a more digital banking environment and the need for a human touch.
INNOVATION IN SERVICING, THE FULL-SERVICE DISCOVERY BANK SOLUTION
At Discovery Bank we have built a bank branch in your hand.
We are a completely digital, full-service bank.
You can complete all the tasks you would normally need a branch or private banker for quickly, 24/7 without leaving your home. In fact, we have digitised every element of banking providing service levels that are superior in every way to a branch:
- Clients can onboard themselves 24/7, activate a virtual card and begin transaction immediately.
- The credit process is completely automated, instantly approving credit based on a client’s credit score and affordability.
- You can also complete your credit application in the comfort of your own home, reducing the stress and anxiety of possibly being declined in a branch.
- Not only are we fully automated in the on-boarding process (in some cases we may require more information), but our Vitality Money programme ties seamlessly into our on-boarding process to understand a potential and existing client’s behaviour to include their financial behaviours as a measure of risk to the Bank – which means we look at how well people manage their money and not at income alone. As a shared-value bank this enables us then to set interest rates and other banking benefits that create value for clients from the start. This includes some of the best interest rates on borrowings and savings, savings on travel and HealthyFood, and the ability to earn Discovery Miles – our digital currency that provides savings, which gives it greater value than cash.
- All statements, proof of banking documents, and transaction listings can be downloaded directly from the app or sent to your email.
- Payments to your friends and family can be done quickly and simply in the app, through Discovery Pay, using just the cellphone numbers from your contacts list. Our banking platform is also fully integrated with Apple Pay and other contactless, easy-pay banking options.
- Further, our clients can generate virtual cards inside the Discovery Bank app so that they can start transacting the moment they join the Bank. Being able to add a virtual card to their banking profile, enhances the safety of payments and reduces the possibility of losing a card. Clients can also create more than one virtual card for their varying types of account or online payments – enhancing the security of their banking transactions.
- We also have valuable added services
- Smart Search, an in-ap service, allows clients to search through thousands of transactions in a simple and intuitive manner.
- With Smart Vault, you can take a picture of your till slip and attach it to your transaction, so you never have to worry about losing a till slip again. This is especially useful for exchanges, warranties or even when needing to claim from insurance.
- Being a completely digital bank and considering the risks posed by cybercrime today, our systems have been built from scratch to incorporate the most advanced security features.
- Proprietary facial recognition tools allow us to verify a client’s identity before conducting any transactions through the Discovery Bank app.
- We also apply state-of-the-art algorithms that identify potential fraudulent transactions so that we can reach out proactively to our clients to prevent any financial or data losses.
- While the Discovery app is a completely full-service bank branch in your hand, we realise the need that some clients may have for human assistance.
- We have a 24-hour call centre that supports clients.
- Here we also deliver exceptional turnaround times in answering client queries and client calls are answered within 30 seconds. (As a business built from the ground up, we needed to gauge the services our clients will require as the Bank grew and have vastly improved service levels over time through advances in the app and up-skilling of our service agents, including when it comes to the implementation of:
- Live Assist – a ground-breaking virtual assistance tool. When clients initiate a call to our call centre, our agents can walk clients through their app, pointing out how to find and access key features in a simple and secure manner. Service agents only see the information they need to see to assist the client and all personal information is secure. As we continue to develop this service to work directly from the app and use it to its full ability, it will place Discovery Bank among leaders in digital servicing – while clients know they can always interact with or get the human touch when they need.
WHAT ABOUT OLDER PEOPLE WHO ARE NOT AS TECH SAVVY
- Digital banking is a fast and effective way to gain access to these financial services, reducing the barriers of entry into the banking sector, and resulting in more choice for banking clients.
- Digitally engaged people are definitely experiencing the value of this way of banking and one of our recent studies also showed they are 20% more likely to change their banking relationship than the average client in South Africa, who takes about 29 years to do so. Indicating again how technology lowers the barrier of entry and receiving greater banking benefits.
- Interestingly, we have seen that the pandemic has changed the behaviour of people, especially those in older generations who would previously have preferred branches.
- A recent McKinsey report indicated that age is no longer a differentiator for digital banking preferences.
HOW DOES DIGITAL BANKING MAKE LENDING LESS INTIMIDATING?
For many people, it can be a stressful experience going into a bank to apply for a loan – there’s a lot of paperwork, you get shown away when you don’t have everything they need (time), you have the possibility of facing rejection of the application in a public environment. There is also a lot of paper involved and loan contracts that have to be stored.
These issues are limited when applying for a loan or credit digitally. Firstly, it is a far less intimidating experience. You can set aside the right time to apply online, there is no waiting in queues and the process and documents you need are laid out upfront, and the decision is shared immediately without leaving people possibly feeling embarrassed. When the application is approved, all lending contracts are shared digitally for safe storage and easy access.
At Discovery Bank, using technology and data, the lending process is taken a step further and goes beyond simple credit scoring and affordability – we can actually assess a client’s financial behaviours – for example what savings behaviour they have, how they manage other debt and investment or insurance products. Knowing this allows us to identify clients that are often mispriced by traditional banking model to offer them better terms on their credit through dynamic interest rates. DB stat: Through Dynamic Interest Rates, the total client base has benefited with over R15.5 million in savings rate boosts and saved over R13 million on interest from their borrowings
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