‘Super bank’ to drive Discovery’s next phase of growth

Discovery is confident its new ‘super bank’ strategy, the next step of which is to be unveiled in October, will help propel the group and its South African businesses – including Health, Life, Invest and Insure – towards profit growth of between 15% and 20% a year over the next three years.

In this last year, it achieved a 17% increase in normalised profit – nearly precisely in the middle of its range.

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CEO Adrian Gore says the percentage of people joining the bank who are not existing Discovery customers is up to 70% (it had been around two-thirds).

This means “there’s millions of members in the Discovery base that aren’t members of the bank”.

Currently, this amounts to 1 000 people a day, which is an astonishing number.

With the super bank, the plan is to bring this all together in a powerful refreshed app, rolling out in October, which will bring those other ‘composites’ into a single interface.

It sees this as being an “integrative control layer for a customer’s entire economic life – orchestrating their financial, health, and lifestyle ecosystems, and converting verified behaviour change into a single currency of real value”.

There’s a lot to read there.

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Basically, the Discovery Bank app is going to become the primary app for anyone with a Discovery product. Gore says this trend overall is “forming into a very, very powerful composite maker”.

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Therefore, it could surface – or sell – any of its other offerings, including Health, Life, Invest and Insure to a customer. The key here is that there is such little overlap between these pools of customers.

Source: Discovery

A model rivals may not match

He believes Discovery’s ‘super bank’ strategy would be “in and of itself” hard to replicate by any of the other banks. Core to this is the group’s shared-value model, and while not impossible, he doesn’t think any of Discovery’s competitors would do it.

“I think we stand for something others don’t really stand for.”

What is interesting is that Discovery is already able to attach another product in its house at a far faster rate to Bank customers than to its broader base.

In other words, a Health or Insure customer might take up a second product in more than two years, versus just over six months for a banked customer. This rate of adoption increases over time, according to Discovery’s experience.

How the ‘super bank’ will evolve

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Gore says the ‘super bank’ strategy represents an “advancement on three fronts”.

“One is kind of management functionality, as the bank grows its functionality and the ecosystems grow. You get kind of this ability to access ecosystems from health to fitness to travel to fuel to food, et cetera, and that’s what you will see.

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“The second is kind of the bank is forming the rails of the group to an extent when you analyse the power of the bank, security, anti-fraud payment systems is actually the tool for all the products.

“Again, going forward over time, whatever product you buy from Discovery, whether you’re a bank, whether you’re a bank account holder or not, you’ll be using the rails of the bank and that gives us the ability to offer you dramatically more value.”

Listen to Jimmy Moyaha speaking to Discovery founder and CEO Adrian Gore on the group’s full-year earnings in this SAfm Market Update with Moneyweb podcast:

You can also listen to this podcast on iono.fm here.

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