Case Study
The better the question The better the answer The better the world works
Case Study

How the world’s first behavioral bank is focusing on customer needs

Improving customers’ financial health required a bold, new approach to building the world’s first behavioral bank.

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The better the question

How can banks offer their customers greater financial well-being?

Incentivizing the importance of financial well-being can motivate customers to improve their financial behavior.

Changing behavior is never easy. Often, people require compelling incentives to adjust their lifestyle choices for the better.

Today, technology has enabled people to make essential lifestyle changes faster and in a highly personalized manner. Digital tools that allow people to track their fitness levels, dietary habits, sleeping patterns, and more, have increased individual’s awareness of how good habits can positively influence their overall well-being.

Alongside improved lifestyle routines, financial well-being is a vital component of people’s happiness, productivity and social engagement levels.

However, most people lack the kind of financial literacy they need to make confident, well-informed money-related decisions. They may know that it’s sensible to save, but not how to make the most of their savings to maximize their financial security for both the short- and long-term.

South Africa-based insurance organization, Discovery Group, recognized this challenge. Much as insurance can save a lot of stress and money in the long run by providing a safety net, so too can better financial management. This is part of the reason why Discovery decided to place customer behavior at the center of its new bank’s operating model.

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The better the answer

Creating an operating model with the customer at its core

In helping Discovery Bank to realize its vision, EY worked as an effective partner in implementing the bank’s back-end systems.

Inspired by the Discovery Group’s Vitality Shared-Value Insurance model, Discovery Bank’s vision concentrated on building the world’s first behavorial bank – encouraging customers to be financially healthy and rewarding them for their efforts through its Vitality Money rewards program. Customers are incentivized to make shrewd financial choices to help them advance through the bank’s Vitality status levels – meaning the better they are at maintaining strong financial health, the more they are rewarded. These rewards vary from dynamic interest rates to flight and gym discounts. The bank’s vision also included a long-term plan, of up to 30 years, to help customers maintain continual financial well-being.

From the beginning, the bank understood that it would need to partner with external experts who could assist the bank in developing its operating model. EY’s expertise in banking, customer experience, risk and compliance issues, and SAP’s expertise in technology, were integral to ensuring that the bank’s back-end function developed into reality.

The challenge Discovery Bank posed for EY, as the partnership began, was to work with SAP to efficiently implement a back-end system to complement Discovery Group’s vision. The bank’s ambition to help its customers improve their financial health would require advanced banking technology and automated solutions.

EY’s work with Discovery Bank was carried out in different phases, spanning three years. During this time, EY’s work ranged from helping Discovery Bank to navigate regulatory requirements and obtain a banking license, to deciding how best to implement SAP’s core banking technology platform, with a constant focus on customer experience.

We gained a real competitive advantage in working with EY because they knew how to implement the SAP banking systems and had a lot of experience to do this quickly.
Jérôme Frey, Programme Director, Discovery Bank

Building a viable business case

EY’s first step in its journey with Discovery Bank focused on helping it prepare for its banking license submission. Besides meeting the normal compliance requirements for such an application, some of the main challenges to emerge related to the regulator’s concerns about how such a digital bank would operate in practice, and if it would pose any systemic risk to South Africa’s banking sector.

In its effort to reassure the regulator, EY focused on building a clear business case with the bank, demonstrating the benefits of Discovery’s Vitality approach, as well as how it would comply with South Africa’s regulatory environment.

However, building a business case for a skeptical regulator was not the only challenge – if regulators wanted reassurance, so would the customers this new bank was being designed to help.

Choosing a new design

The EY Seren team – EY’s specialist customer experience agency that travelled from the UK to spend several months with the Discovery Bank team in South Africa – helped the bank explain the idea of a data-led behavorial bank to potential customers. The team began by spending a month going out and talking to various customer target groups to fully understand what people really needed from a bank to:

  • Define a new customer experience for a behavorial bank
  • Identify the most appropriate channels for delivery
  • Develop a simple account proposition for the bank

The EY Seren team’s success in engaging customers in the bank’s philosophy gave Discovery confidence in putting behavior at the heart of its operating model.

Our focus on customer centricity really resonated with the bank and was a key factor in it engaging our team in creating a service design approach.
EY Seren team

With that, the bank asked the EY Seren team to train its own people to create an in-house service design team. This included:

  • How to interview potential customers
  • How to understand a customer journey
  • How a customer journey can be mapped out
  • How to start building an operating model around the kind of customer experience the bank wanted to create

In outlining the benefits of a digital-first, customer-centric approach in the license application, EY helped to satisfy the regulator that Discovery Bank’s operating model would greatly enhance South African’s banking experience.

Implementing the technology architecture

Parallel to the license application process, EY worked on administering the right technology architecture for the bank. This meant creating a team of different EY subject-matter experts in quality assurance, banking and technology, who worked together to assess how best to implement SAP’s core banking technology.

One of the main benefits of working with SAP is its capacity to hold all of the bank’s customer information in one database – a key requirement for a digital bank. This gives Discovery the advantage of being able to produce better banking products, analytics and insights to serve customers better.

Having spent almost 30 years building products in big retail banks, I’ve never seen anything close to what Discovery was trying to do.
Darrel Orsmond, SAP Africa team

Working together with EY, SAP devised 12 test case user scenarios to thoroughly examine whether the banking platform could support the key requirements of Discovery’s customer-centric operating model, including:

  • Dynamic and variable pricing for products
  • Acquiring clients
  • Servicing clients
  • Closing accounts
  • Managing transactions
  • Government compliance and risk requirements
  • Call center and marketing technological needs

This ensured the focus remained on customer behavior – as well as that each subsequent product would work seamlessly with the bank’s Vitality platform.

Banks build products that are good for banks, not their customers. The opposite is true of Discovery Bank.
Gary Sandham, SAP Africa team

EY’s work with SAP enabled the development of an unstructured, agile working environment which facilitated the bank to incrementally improve its back-end systems and processes.

Building a united team of partners

The EY team’s comprehensive insight into the bank’s back-end system, and its granular knowledge of SAP’s core banking platform technology, all contributed to it becoming the bank’s primary partner in the detailed design phase of the project. Indeed, during this early period, Discovery Bank’s staff totalled 6 people, whereas EY’s team came to over 20.

In practice, this meant that EY became responsible for managing the project’s external back-end partners, which surged from roughly 50 to over 160 at the peak of the build phase. This included SAP, a CRM partner, a trading partner and a Germany-based marketing software partner.

By focusing on the shared purpose of creating a truly innovative bank, EY was able to bring these disparate teams together as one. A further challenge – which helped to cultivate this one-team mentality and ensure a strong focus on seamless collaboration – was the bank’s desire for all of the technology and processes to be implemented over a 12-month period.

This phase was critical and would not have been possible without a harmonious working relationship between the bank, EY and all of the partners EY had to manage.
Jay Pather, Africa Technology Leader, EY
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The better the world works

Digital first, customer first, banking first

Discovery Bank is now one of the main challenger banks in South Africa. It is also starting to serve as an inspiration for other banks around the world.

Launched in March 2019, Discovery Bank is now one of the main challenger banks in South Africa.

A new approach to banking

Discovery Bank’s approach shows that securing personal financial well-being is not just the responsibility of the individual, but that banks can also play an important role in helping people achieve this aim.

It is in banks’ interest to help their customers better manage their finances – because more financially secure customers result in more financially secure banks, and a more financially secure society.

If people are more financially literate, and have worked to increase their financial resilience, this can help stabilize the banking sector and serve as a kind of insurance for society.

Improving financial – and physical – well-being

By putting a spotlight on financial well-being and, crucially, by offering a digital-first way for its customers to achieve this, Discovery Bank is offering a pioneering example to the broader financial sector of how to develop greater financial health while boosting customer satisfaction levels.

The bank’s personalization of products and services, and the availability of numerous incentives and rewards through its Vitality Money platform, presents customers with an alternative way to bank in today’s transformative age.

Discovery Bank’s vision to motivate customers to bank healthier is an important step in the financial sector’s recognition of the role it can play in improving people’s financial well-being – and that of the economy as a whole. What Discovery Bank has created could just be the start of a whole new way of banking.

Thank you to Jérôme Frey (Discovery Bank), and Gary Sandham and Darrel Orsmond (SAP Africa) for their help with this case study.