Discovery Bank missed its client acquisition target, but Adrian Gore is smiling – Here is why

Discovery CEO Adrian Gore said they are very happy with Discovery Bank’s numbers despite missing their own client acquisition target.

Discovery Bank officially launched in November 2018 with products designed to improve the money management of clients.

After a testing phase, Discovery Bank opened its platform for new sign-ups on 1 July 2019 with a target of signing up 1,000 new customers every day by the end of August 2019.

This sign-up rate was part of the bank’s strategy to reach the bank’s break-even point of 500,000 to 600,000 clients.

Based on Discovery’s August 2019 target, it should have reached over 200,000 clients by now. This did not happen.

Discovery revealed in its interim results for the six months ended 31 December 2019 that Discovery Bank had 78,000 clients as of 18 February 2020.

This means that Discovery missed its own target of signing up 1,000 clients per day by a large margin.

Problems with Discovery Bank

Discovery Bank launched during a challenging time in South Africa, with a tough economy and increased competition in the banking market.

Business Day TV’s Giulietta Talevi further highlighted that many potential Discovery Bank clients – including high net-worth individuals – are leaving the country.

Another potential issue was trade union Solidarity’s campaign against Discovery Bank’s share plan where black clients received 10% of the shares in the bank.

Solidarity said Discovery Bank “doesn’t want to reward people according to their behaviour alone, but also according to their race”.

Gore admitted there was some political risk as the plan excludes white customers, but said they were convinced it is a good thing to do.

There were also a few technical issues and security problems with Discovery Bank over the past few months.

In October, Discovery Bank credit cards were affected by a security vulnerability that allowed you to make online purchases without knowing a specific bank card’s CVV number.

One month later, Discovery Bank clients have had the full outstanding balances on their credit cards taken from their bank accounts via debit order by mistake.

There were also problems migrating from their Discovery Gold credit card – issued under licence from FNB – to their Discovery Bank credit card.

It is not clear what impact these technical issues or Solidarity’s campaign had on Discovery Bank sign-ups.

Discovery “very happy with the numbers”

While one may have expected concern from Discovery about missing its client acquisition target by such a large margin, this is not the case.

Gore told MyBroadband that when they launched the bank, they were aiming to bring on 1,000 clients a day at an expected level of one account per client, i.e. 1,000 accounts per day.

“As we have grown, we’ve seen that the client engagement levels have far exceeded expectations in all key areas, in particular the number of accounts per client,” said Gore.

“We have now exceeded 180,000 accounts which reflects the target run rate of approximately 1,000 per day since July.”

He explained that account numbers, along with deposits, spend and credit extension, are the most accurate metric of Discovery Bank’s footprint.

“While absolute growth is obviously important, we are focused on attracting quality customers who engage with the bank and its incentives to improve financial behaviour,” said Gore.

He added that they have seen positive early engagement and that their clients’ spend, credit, arrears, and deposits were better than the market.

Gore said they are anticipating accelerated growth with over 200,000 accounts planned to migrate from FNB in the coming months, over and above the current run rate.

“We therefore remain markedly ahead of our targets and pleased with the performance and progress,” said Gore.

Discovery CEO Adrian Gore interview

Now read: Discovery Bank – Client numbers and deposits revealed

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Discovery Bank missed its client acquisition target, but Adrian Gore is smiling – Here is why