Banking in South Africa will never be the same, now that two well-known entrepreneurs have been issued with bank licences.
Discovery, ranked as one of the top 40 on the JSE, has now been granted a banking licence in South Africa. The insurer will now become one of two new banks to establish a banking presence in 2018. The other player being TymeDigital bank, backed by billionaire Patrice Motsepe.
Discovery is a South African JSE listed company focusing on healthcare, life assurance, and investments, and has recently added retail banking to their service offering. About two years ago, the contrarian Adrian Gore, founder and chief executive of Discovery, announced that the insurer planned to launch a bank, which created uneasiness in the banking sector.
Gore, the same man that disrupted the medical aid and insurance sector not too long ago, now wants to do the same in the banking environment. Under Gore’s leadership, the company has seen its share price triple over the last five years.
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Besides competing with the big four banks, Discovery will also have to contend with billionaire Patrice Motsepe’s TymeDigital bank, which also promises to disrupt the banking industry in 2018 by using a digital platform.
"The South African banking environment is due for a bit of disruption," said TymeDigital CEO, Johan van der Merwe.
It seems that both Discovery and TymeDigital will give the big four banks a run for their money by launching their service in a cost-effective way. Both banks will operate from a lower cost base, making them more competitive and allowing them to offer clients lower banking fees.
As opposed to TymeDigital who will target lower income groups and entrepreneurs in the small and medium-sized sector, Discovery has set its sights on above-average income individuals, a wealthier audience.
How will other banks respond?
Peter Schlebusch, Standard Bank’s CEO of personal and business banking, says: "We compete against all banks. Our customers have a choice to go [to any bank] at any time. I don’t think we should be fixated on Discovery Bank." He says Standard Bank won’t be changing its strategy to respond specifically to Gore. "We will continue to be the best version of ourselves," he says.
According to Adrian Gore, the company’s banking unit was on track to be up and running by the middle of 2018. In the company’s 2016 annual report, Gore said Discovery had attracted senior seasoned bankers in anticipation of the bank becoming operational.
Jeremy Woods trained for three years as a journalist on the Herts Advertiser, St Albans, in the U.K. Once qualified, he left England to work as a crime reporter on the Vancouver Sun in Canada. After three years, he worked for the Los Angeles Times as a trainee financial journalist, spending most of his time reading company accounts and finding publishable stories in them. He moved to South Africa and for the last five years in journalism worked for the Sunday Times, Business Times, as Investment Editor. He has also published a financial thriller called "Special Payments", which was a best-seller on publication, and optioned three times for a film.