TechCentralTechCentral
    Facebook Twitter YouTube LinkedIn
    Facebook Twitter LinkedIn YouTube
    TechCentralTechCentral
    NEWSLETTER
    • News

      Fixing SA’s power crisis is not complex: it simply takes the will to do better

      12 August 2022

      Consortium makes unsolicited bid for state’s 40% stake in Telkom

      12 August 2022

      Actually, solar users should pay more to access the grid – here’s why

      12 August 2022

      Telkom says MTN talks remain on track

      12 August 2022

      Analysis | Rain muddies the waters with approach to Telkom

      11 August 2022
    • World

      Tencent woes mount, even after $560-billion selloff

      12 August 2022

      Huawei just booked its first sales rise since US blacklisting

      12 August 2022

      Apple remains upbeat about iPhone sales even as Android world suffers

      12 August 2022

      Ether at two-month high as upgrade to blockchain passes major test

      12 August 2022

      Gaming industry’s fortunes fade as pandemic ends

      11 August 2022
    • In-depth

      African unicorn Flutterwave battles fires on multiple fronts

      11 August 2022

      The length of Earth’s days has been increasing – and no one knows why

      7 August 2022

      As Facebook fades, the Mad Men of advertising stage a comeback

      2 August 2022

      Crypto breaks the rules. That’s the point

      27 July 2022

      E-mail scams are getting chillingly personal

      17 July 2022
    • Podcasts

      Qush on infosec: why prevention is always better than cure

      11 August 2022

      e4’s Adri Führi on encouraging more women into tech careers

      10 August 2022

      How South Africa can woo more women into tech

      4 August 2022

      Book and check-in via WhatsApp? FlySafair is on it

      28 July 2022

      Interview: Why Dell’s next-gen PowerEdge servers change the game

      28 July 2022
    • Opinion

      No reason South Africa should have a shortage of electricity: Ramaphosa

      11 July 2022

      Ntshavheni’s bias against the private sector

      8 July 2022

      South Africa can no longer rely on Eskom alone

      4 July 2022

      Has South Africa’s advertising industry lost its way?

      21 June 2022

      Rob Lith: What Icasa’s spectrum auction means for SA companies

      13 June 2022
    • Company Hubs
      • 1-grid
      • Altron Document Solutions
      • Amplitude
      • Atvance Intellect
      • Axiz
      • BOATech
      • CallMiner
      • Digital Generation
      • E4
      • ESET
      • Euphoria Telecom
      • IBM
      • Kyocera Document Solutions
      • Microsoft
      • Nutanix
      • One Trust
      • Pinnacle
      • Skybox Security
      • SkyWire
      • Tarsus on Demand
      • Videri Digital
      • Zendesk
    • Sections
      • Banking
      • Broadcasting and Media
      • Cloud computing
      • Consumer electronics
      • Cryptocurrencies
      • Education and skills
      • Energy
      • Fintech
      • Information security
      • Internet and connectivity
      • Internet of Things
      • Investment
      • IT services
      • Motoring and transport
      • Public sector
      • Science
      • Social media
      • Talent and leadership
      • Telecoms
    • Advertise
    TechCentralTechCentral
    Home»Sections»Banking»How digital banking challengers Discovery and TymeBank are faring

    How digital banking challengers Discovery and TymeBank are faring

    Banking By Staff Reporter15 September 2021
    Facebook Twitter LinkedIn WhatsApp Telegram Email

    African Rainbow Capital Investments, which owns 23.9% of TymeBank, says it expects the digital bank to break even in 2022. This will be three-and-a-half years after launch.

    Discovery Bank, by contrast, is targeting breakeven in approximately three years’ time – in 2024. This ought to be no surprise given that the latter is not intended to be a so-called skinny “neo-bank”. The point at which it will break even is around seven times that of TymeBank.

    Both new banks continue to grow strongly, albeit with very different propositions and target customers.

    TymeBank added over 1.5 million clients in the last year and now has a total of 3.45 million customers

    TymeBank added over 1.5 million clients in the last year and now has a total of 3.45 million customers. It is adding in excess of 120 000 customers per month. A few months ago, the bank said the active portion of that base – in other words, customers who had generated revenue for the bank in the past 30 days – was just above 60%.

    Despite experiencing “some significant headwinds” in the year to June, the group says the bank has managed to achieve its revenue and cost targets. By May, it had attracted deposits totalling R2.1-billion.

    Operating costs

    TymeBank’s operating expenses (excluding depreciation and amortisation) in calendar 2020 were R1.06-billion. However, in a presentation earlier this year it pointed to a 12% decline in operating costs when comparing the first quarter of this year to last year. This is a consequence of the bank continuing to scale. Notably, it says it has “reshaped distribution costs through restructuring of partnership commercial arrangements around volume and performance”.

    The partnership with the Zionist Christian Church (ZCC) announced two months before lockdown hit last year, which targeted two million adult customers across South Africa, has been delayed because of the Covid-19 pandemic.

    By its 2023 financial year, TymeBank expects just 60-70% of revenue to come from existing products.

    It sees the following revenue streams contributing materially:

    • Insurance, via a partnership with Hollard that was launched in the last year;
    • High-frequency lending, which comprises MoreTyme (buy-now-pay-later instalment credit product), as well as still to-be-launched TymeAdvance and its “short-term unsecured personal lending product”;
    • Lifestyle value-added services (VAS) beyond traditional VAS such as airtime and electricity); and
    • Subscription bundles.

    In so-called “steady state” – from 2025 to 2030 – TymeBank expects its retail cost-to-income ratio to be just 25%. This is less than half the cost-to-income ratio of the traditional four full-service banks, and significantly lower than Capitec’s 40%.

    Discovery Bank reported operating expenses of R1.67-billion for the year to end-June (this excludes R246-million in depreciation and amortisation and R271-million in expected credit losses).

    The group announced last week that it added 90 000 clients in the financial year, an increase of 86% on the prior year. At the end of June, Discovery Bank had 362 000 clients with 649 000 accounts. It says it is “achieving 500 average daily new-to-bank sales, in line with the medium-term forecast”.

    At the end of June, Discovery Bank had 362 000 clients with 649 000 accounts. It says it is achieving 500 average daily new-to-bank sales

    Primary clients make up 92% of the total number and it says two in five are bank-only clients.

    This presents a real opportunity to sell other Discovery products to these customers. The penetration of Vitality Money (fewer than a third of the base at Diamond status) also offers opportunity.

    It grew retail deposits by 167% to R8.2-billion in the year (versus 7% across the market), while advances edged up just 5% to R3.8-billion (still, it contends this is faster than the market’s 4.5%). The group says this is as a result of a “deliberate decision to pursue a prudent credit strategy”.

    Its credit loss ratio, which includes a Covid-19 overlay, is 4.6% for the year – far lower than card and unsecured lending businesses of rival banks.

    Across its local operations, 4.9 billion Discovery Miles (equivalent to R490-million) were earned in the financial year, with 2.9 billion miles spent (R290-million).

    Its new ‘Miles D-Day’ on the 15th of each month, which offers customers double their discount level, has seen members spend their miles at a rate surpassing even Black Friday (8.5 times the daily average, versus 5.5 times).

    The plan all along has been for Discovery Bank to break even at “roughly” 500 000 to 600 000 clients. If it continues to attract clients at current rates, that means break even in about FY2024 (July 2023 to June 2024).

    The bank is not saying this, but one assumes that if its credit appetite changes – and if the environment becomes more conducive to lending – it may turn profitable slightly sooner.

    • This article was originally published by Moneyweb and is used by TechCentral with permission
    African Rainbow Capital ARC ARC Investments Discovery Discovery Bank TymeBank
    Share. Facebook Twitter LinkedIn WhatsApp Telegram Email
    Previous ArticleHuawei founder says firm ‘more united than ever’ as it eyes 6G
    Next Article OneWeb launches satellites in global Internet service push

    Related Posts

    Fixing SA’s power crisis is not complex: it simply takes the will to do better

    12 August 2022

    Consortium makes unsolicited bid for state’s 40% stake in Telkom

    12 August 2022

    Actually, solar users should pay more to access the grid – here’s why

    12 August 2022
    Add A Comment

    Comments are closed.

    Promoted

    Get your brand in front of TechCentral’s amazing audience

    12 August 2022

    Pricing Beyond CMYK: printers answer the FAQs

    11 August 2022

    How secure is your cloud?

    10 August 2022
    Opinion

    No reason South Africa should have a shortage of electricity: Ramaphosa

    11 July 2022

    Ntshavheni’s bias against the private sector

    8 July 2022

    South Africa can no longer rely on Eskom alone

    4 July 2022

    Subscribe to Updates

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    © 2009 - 2022 NewsCentral Media

    Type above and press Enter to search. Press Esc to cancel.