Banksurers Here, There and Everywhere

March 7, 2019

The financial services sector in South Africa doesn’t have many examples of Behavioural Finance or Economics, though more companies are taking this approach each month. As we anticipate the public launch of Discovery Bank this month, the Discovery Vitality model is probably the best-known example of Behaviour Economics in the country. The 20-year old rewards programme has an established track record with Vitality members generating roughly 30% lower hospitalisation costs and living from 13-21 years longer than the rest of the insured population[1]. Even the pundits are saying it’s got the best chance of success, out of all the new banking entrants.

Two other insurers have made known – or felt, in the case of one of them – their intentions to also enter the banking space. Each of them is certain to bring their rewards programmes into their business models as well, to improve consumers’ financial behaviour and make this stick. Momentum is expected to position its Multiply Money benefit as a fully digital savings and transactional offering. The benefit is offered through its wellness programme, running since at least 2013. Multiply Money already offers consumers assistance and rewards for good financial behaviour, such as completing one’s financial wellness status in a formal assessment, checking in with an accredited advisor and tracking spend through the mobile app.

While Old Mutual has reserved comment on whether or not it will apply for its own banking licence, it would seem logical that it would, given its integrated financial services model. Old Mutual launched its own rewards programme in mid-July 2018, linking this directly to ‘good financial behaviour’. Old Mutual has been already running a low-cost transactional Money Account since August 2015 through Bidvest. The company knows the South African banking market very well from its Nedbank shareholding and it owns Zimbabwe’s second-largest bank, Cabs. It stands to reason that this well-resourced group could bring some serious competition to the market.

With the degree of disruption that is expected in 2019 – new banks and insurtechs on the rise – there’s never been a more pressing time for financial services companies to monitor competitor strategies and behaviour, in order to remain relevant.

[1] Harvard Business Review, June 23, 2017: “Can Insurance Companies Incentivize Their Customers to Be Healthier?”