How the Discovery Bank CEO convinced me to change my account

BizNews founder Alec Hogg quizzes Discovery Bank’s CEO Hylton Kallner about the organisation’s innovative referral programme, inspired by its customers, Uber and AirBnB. Before the end of the conversation, the usually sceptical Hogg has heard enough to swap over his account from the bank he’s been with for decades. He says he always “got” the group’s shared value concept, but now finds it impossible to argue against 75% discounts on air travel and healthy food.

Discovery Bank’s CEO Hylton Kallner on the referral rewards:

The idea actually comes from our clients – as do so many of our innovations and ideas that we have within the group. It emanates from the fact that we received a lot of feedback from clients, that they are promoting the bank activity to their networks, friends and family. They should be rewarded for it, in a sense. If you think about globally today, digital businesses [and] organisations that have really powerful technology platforms are being grown by their own networks. We’ve always seen our clients as our greatest ambassadors, really the advocates that we want for our products. Bringing it all together, we realised that we had a phenomenal opportunity to do something different.

On the numbers Discovery Bank is seeing at the moment:

The initial response has been quite remarkable. In the first seven days, we’ve seen our clients send out over 100,000 referrals to their contacts [and] networks. The traction has far exceeded any expectations that we’ve had going into this. It’s really been pleasing to see. Perhaps what differentiates our proposition is that we have a few existing assets that really lend themselves to this kind of movement and strategy – one of which is our Discovery Miles, which is our own rewards currency. Our clients are able to effectively gift Miles to their friends and family and earn the same amount in return when they join the bank.

On the incentives:

The incentive is pretty simple. You can effectively gift up to 5,000 Discovery Miles, which is equivalent, in cash, to at least R500. But depending where you use it, often up to amounts which are which are much greater. That’s what the new joiner receives. The existing client receives the same amount. It’s quite a valuable reward that’s being generated. It really reflects our belief that our clients are going to bring the same kind of quality clients into the bank as they currently represent.

 The limit is up to 5,000. It’s not unlimited and you can only, effectively, get paid once per client. There are some limits in place. But effectively, as soon as somebody becomes a client they can then onward refer as well. It’s quite a powerful mechanism that’s been created.

On innovative banking:

Historically, there’s been a huge amount of inertia in banking in South Africa. But to be fair, I think that banking hasn’t changed much in the last 50 to 100 years in SA. So, South Africans haven’t had a great reason to change and it was often very difficult. Our approach is fundamentally different. The model is different. It’s more rewarding. You can earn better interest rates on your bank account and it’s easy to switch. I think we’re starting to see that consumers are reacting to that for the first time in a long time.

On whether Discovery plans on entering the home loan market:

In time. We’ve said that we absolutely will grow our product offerings that we have. Home loans is a natural space to play. At a group level, we offer home insurance through Discovery Insure. We offer the mortgage protection through Discovery Life. We’ve got a fairly well-evolved ecosystem around the home already. That will take some time before we go into that market as well. I think the just the natural pace of development makes it quite capital intensive from a funding perspective.

And, the number of home loans relative to other retail products is relatively low. Over time, obviously, it builds up to be something quite significant. But the number of new home loans per month is much lower than what you’d find in other in other product segments. The business case for us just isn’t strong enough at the moment.

On Discovery Bank rewards:

If you do have existing Discovery Health products, the rewards stack-up. A great example is our healthy food benefit, which is well-known. It’s used by over 500000 families on an almost daily basis. You get 25% off all healthy foods at our partners – Woolworths and Pick n Pay. The bank then takes that up to 75%, depending on your your product and how you’re spending. You’re getting the opportunity to get your healthy food at a discount, which is almost crazy in a sense at 75% off.

The same applies in travel. At the moment we’re curtailed to a certain extent. Pre-Covid, we were seeing our clients take about 1 million flights a year, with our partner Kulula and British Airways domestic. Those discounts were up to about 35% off the flight. If you’ve got the bank, you can take that up to 75% off.

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