Question

evaluate the business model of the Challenger banks of South Africa(discovery bank, tymer bank).

Answer 1

Discovery, a well-established South African financial/insurance services group, received the green light from the regulators to set up a bank in H2 2016. By mid-2019, the bank started to onboard the first customers.

The new bank is the “world’s first behavioural bank”, the group says. It is based on the “behavioural” model Discovery uses to reward its life and health insurance customers for their lifestyle choices.

To the end of December 2018, a total of ZAR 6 billion ($432.7 million) was invested in Discovery Bank by its parent. Of this, over half – ZAR 3.28 billion ($236.5 million) – was paid to FirstRand Group to acquire the majority stake in the Discovery Card credit card unit. Discovery Card has 250,000+ customers. ZAR 1.31 billion ($94.5 million) went towards regulatory capital invested in the bank and ZAR 1.42 billion ($102.3 million) incurred in Discovery Central Services on the build capital expenditure, test capital expenditure and hardware infrastructure.

It is understood that SAP, Infosys and Oracle FSS bid to supply their technology to Discovery Bank.

TymeBank fully opened for business in early 2019 and claims to be South Africa’s “first fully digital bank”. It is based in Johannesburg.

The bank was officially founded in 2012 under the name of TYME. In 2015, it was acquired by Commonwealth Bank of Australia (CBA) and became TymeDigital.

Three years later CBA sold it to African Rainbow Capital, which describes itself as a “fully black-owned and controlled investment company”. The majority shareholding of African Rainbow Capital makes TymeBank “the first majority black-owned retail bank in South Africa”, the new owner says.

Its main offering is an EveryDay Account, which is takes five minutes to open online or at the kiosks in Pick n Pay and Boxer stores (which are equipped with real-time biometric recognition), comes with a Visa debit card, and has no monthly fees but pay-as-you-use charges. The account also offers a savings tool, money transfer functionality and shopping points when using the card.

For its technology, TymeBank uses Mambu’s core banking system, hosted in the AWS cloud. The bank is understood to be Mambu’s first taker in the region.

180 IT staff worked on creating its digital platform.

Internal service orchestration, payment flows, and backend services are developed in Java as microservices on the Netflix stack, according to TymeBank’s CIO, Dieter Botha. The bank embraced Facebook’s React framework in developing the web-based customer channels, while the Android app was developed using Java.

It uses machine data platform Splunk’s cyber incident monitoring capabilities, which means the bank’s cyber-response team “listens” to more than 40GB of network traffic a day.

In spring 2019 it launched Max, an AI-powered conversational assistant, to help consumers learn about personal finance. The technology was provided by Canadian tech firm Finn AI.