Adrian Gore: Building a bank is harder than you think

Group CEO Adrian Gore says only roughly a third of new Discovery Bank account sales are to existing Discovery customers – which presents cross- and up-sell opportunities for new clients. Picture: Discovery website Discovery CEO Adrian Gore says that despite a plethora of new banking entrants in the South African market in recent years, “it is much harder” than one thinks to start a bank and succeed. It launched Discovery Bank in 2019, and it has taken the group seven years, plus billions of rands in investment, to get to profitability.

It had the scale advantage – sizeable life insurance, health insurance, investment and short-term insurance businesses – that very few entrants can match. He says that some new players will battle as they’re sub-scale, while with others, bureaucracy will be the problem. Beyond this, the traditional ‘big four’ (or ‘big five’, with Capitec) may look slow, says Gore, but that’s not necessarily the case.

Plus, the incumbents are “are much bigger than you think,” he adds. “When you look at their profit pools and you look at the size of their lending books, they are ginormous”, which obviously is a positive for Discovery. Its bank has been able to take market share and get to profitability without much overt retaliation from larger rivals.

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Since the late 2010s, Tyme Bank, African Bank, Old Mutual and Discovery have entered the space, while another entrant, Bank Zero, has been acquired by Lesaka Technologies (formerly Net1). Add to this global fintech player Revolut and Pepkor, who have both applied for banking licences (the latter’s has been granted), while the country’s biggest supermarket group Shoprite harbours serious ambitions of its own. This makes for an intensely competitive environment, which Discovery does not fear.

The bank is well on track to reach – or surpass – its ambition of posting R3 billon in operating profit by the 2029 financial year (which starts in July 2028). Currently, the bank is adding roughly 1 300 customers a day and the group can now extrapolate the net interest income and non-interest revenue (fees) it can generate from each customer. It now has a base of 1.4 million clients with 3.4 million accounts. Revenue was up 34% in the six months to the end of December, at R1.5 billion.

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