A behavioural bank
In March 2019, South African insurer Discovery is set to go live with "the world’s first behavioural bank."
The new digital-only bank aims to address financial risk by following the 5-3-80 model of financial health.
Five controllable behaviours of:
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spending more than we earn,
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not saving regularly,
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not having insurance in place,
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not paying off property and
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not investing for the long term.
These five present three key risks of:
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unaffordable debt,
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exposure to unexpected expenses or loss of income, and
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insufficient income in retirement.
All of which result in 80% of events where individuals are unable to meet their financial obligations.
Discovery Bank is also introducing dynamic interest rates that are linked to financial behaviours of customers, enabling them to earn more interest on savings and pay less interest on credit as they improve their financial behaviour with Vitality Money.
“Our Shared-Value model is highly relevant in the context of banking, and more importantly, in the South African context; given that more South Africans are credit active than employed; 40% struggle to make debt repayments; we have one of the lowest savings rates in the world; and less than 4% of our citizens are adequately prepared for retirement.” Founder and CEO of Discovery, Adrian Gore.
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Hopefully such initiatives encourage further changes to the financial credit sector.
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Geoff Knott, 19/12/2018