South Africans love to hate their banks, and whenever a new competitor comes to town consumers are quick to check out what is on offer.
Discovery Bank, set to launch soon, is one of several new banking players aiming to snatch up market share in the country – but has suffered a few setbacks in recent months.
The most recent of these is that Registrar of Banks advised the company the 25.01% shareholding in Discovery Bank by FirstRand Investment Holdings should be reduced and ultimately exited.
Discovery said it is in talks with FirstRand and hopes to have the matter resolved as soon as possible, which will see it pay FirstRand R1.8 billion. This will also include the acquisition of its Discovery card joint venture.
The latest hurdle follows Discovery receiving its banking licence in October 2017, almost a year ago.
Following the approval of its banking licence last year, Discovery CEO Adrian Gore – speaking to Forbes Africa in December 2017 – said their new bank will be disruptive.
Discovery Bank will target the mass affluent market in South Africa, a “low LSM right the way to the top”, said Gore at the time.
“The value proposition itself will be good for customers. I mean, that is what we do,” he said.
The confident statement from Gore was soon followed by Discovery’s interim results for the six months ended 31 December 2017.
In the results, the company stated its was testing Discovery Bank’s capabilities with live testing of system infrastructure, operating processes, and regulatory engagement.
Discovery added that it had spent R1.2 billion on the bank to date, and that amount was expected to increase.
Fast forward to August 2018, a month before Discovery’s most recent update on its banking venture, and competitors were expressing concern over the imminent arrival of the new player.
Standard Bank group CEO Sim Tshabalala stated in a BusinessDay report that they were bracing for the potential disruption Discovery Bank will bring.
“Discovery are going to be a fierce competitor in the wealth segment and we are worried about them,” said Tshabalala.
The statement, combined with the previous confidence from Discovery, again brought hope to local banking users who were on the lookout for a new place to store their money and accounts.
This wave of excitement has now hit the pier that is Gore’s latest statements on their bank, however.
Speaking to the Sunday Times about the bank this past weekend, Gore “downplayed any suggestion that it will make a big initial splash”.
“If you have a value proposition that resonates, I think in two or three years you know if people like the proposition,” he said in the report.
Gore said the bank will be consumer-orientated at launch and may expand into the corporate and investment sectors in the future.
The CEO reportedly “scoffed” at the idea that Discovery Bank will be a threat to existing banks, though.
“I’m actually worried we are overrated. I mean, we’ve got to earn our spurs,” he said.