Discovery bank says its research shows that South Africans take 29 years to change their bank – roughly 70% longer than the British and double the time of Americans.
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- SA consumers take, on average, nearly three decades to switch banks, new research shows.
- This is around 70% longer than their British counterparts and twice as long as Americans.
- It also signals a tough road ahead for challenger banks hoping to steal market share.
South African consumers are among the most loyal to their banks, taking up to 29 years on average to switch banks, new research by Discovery Bank shows.
The special report effectively means that the challenger banks that are looking to steal market share from incumbents find it hard to do so, unless they drastically disrupt the market in the same fashion that Capitec did 20 years ago. According to the Prudential Authority’s 2019/20 annual report, 89.4% of banking sector assets in South Africa were concentrated among the five largest banks.
Discovery Bank’s report showed that it was mostly younger clients and those who are digitally engaged who are 20% more likely to change their banks than the average banking client in SA.
“Significant inertia and commoditisation have historically resulted in clients avoiding changing banks. Our analysis shows that South Africans take 29 years to change their bank – roughly 70% longer than the British and double the time of Americans,” read the report.
But Discovery said several major trends are emerging that are leading to more customers reassessing this status quo now.
Customers are starting to question the use of their socioeconomic status when banks price their borrowing risk; they are demanding that their banks and other businesses they support focus on societal issues as much as they focus on profits; and with the growing ease to open new accounts online, they are more willing to test the waters if they’d be better off switching by opening additional bank accounts.
The bank said because its peers traditionally used socioeconomic factors to determine an individual’s risk of default, its research showed that this leads to the poor subsidising higher-risk clients just because the latter earn more or have more assets.
“Clients who manage their money well are often mispriced due to their socioeconomic standing. Conventional banks are unable to segment based on behaviour,” said Discovery Bank CEO Hylton Kallner.
The bank said its research shows that more than 10% of individuals who earn above R1 million a year find it difficult to make ends meet.
Discovery Bank believes that its focus on individual behaviour is what consumers are looking for and that its shared value model is going to be a major beneficiary of this change in consumers’ attitude towards banks.
The bank said it has already signed up more than 300 000 clients who have opened over 500 000 accounts and trusted it with more than R6.5 billion in deposits.