Discovery Limited · JSE:DSY
Discovery — 2021 JP Morgan Conference
30 slides from Discovery's conference presentation, Dec 8, 2021
Slide 1: Discovery Bank | Update
DISCOVERY BANK | UPDATE 8 December 2021
Slide 2: The Discovery Bank Strategy
The Discovery Bank Strategy Discovery Assets Shared-value banking model Full service offering Digital Bank scalability Data Brand Client base Distribution Vitality Money Designed to capitalise on Behavioural correlations Primary account utilisation Highly scalable fixed-cost Discovery’s strategic as
Slide 3: Banking ecosystem
Banking ecosystem Comprehensive product suite Vitality Money Behavioral ecosystem Integrated measure of clients’ financial management Market-leading, personalised interest rates High-value rewards World’s first Shared-Value travel platform Discovery Miles as the Shared-Value currency across the Grou
Slide 4: Full retail product suite
Full retail product suite Product Electronic Electronic Virtual Virtual Live Assist Assist Demand, tax-free, notice Web eb selection and Secure FICAKYC Digital KYC Live Transaction and Forex KYC cards Transact cards credit cards & fixed-deposit accounts origination (24hr – 5 years) Full onboarding i
Slide 5: Shared-value model drives superior interest rates, deposits and rewards
Shared-value model drives superior interest rates, deposits and rewards 4,25% 5,25% Personalised savings 4,25% 5,25% and borrowing rates ze d ue d er er d d ze ue ol ol on on on lv lv Bl on Bl G G Si Si m m Br Br ia ia D D Savings Deep discounts at partners Debt Most rewarding and comprehensive Trav
Slide 6: Digital banking and payment eco-system
Digital banking and payment eco-system Peer to Peer Unlimited virtual cards Pay as you Gym Easy equities Health Pay Benefit and co- payment check Claims system Bank for co-payment • Full reconciliation • Payment to doctor and payment to member (if applicable) Invest Endowment Plans backed Guaranteed
Slide 7: Robust data and machine learning capability underpin all bank eco-systems
Robust data and machine learning capability underpin all bank eco-systems Powerful single data asset Enhanced journeys, messaging and value to customer Personalized in-app Financial Manager, product personalisation & Client interaction improves algorithms, engagement recommendations recommendations
Slide 8: Performance levers
Growth Discovery Pay account Vitality Money Discovery Pay Miles Rewards and Travel x Deposits Behavioural Interest Advances correlations margin PERFORMANCE = Credit loss ratio LEVERS x Revenue/client Engagement + Utilisation + Fees Expense ratio Fixed costs Expenses/ client Discovery Bank Limited. R
Slide 9: Performance levers
Growth Discovery Pay account Vitality Money Discovery Pay Miles Rewards and Travel x Deposits Behavioural Interest Advances correlations margin PERFORMANCE = Credit loss ratio LEVERS x Revenue/client Engagement + Utilisation + Fees Expense ratio Fixed costs Expenses/ client Discovery Bank Limited. R
Slide 10: Discovery Bank client base
Discovery Bank client base Client age distribution Deposits/client by card colour Advances/client Bank Discovery 85,000 27,500 70,400 20,000 19,300 5,400 10,800 <30 31-40 41-50 50-65 66+ Savings only Gold Platinum Black & Gold Platinum Black & Purple Purple Family structure (%) Spend behaviour Credi
Slide 11: >600 clients join the Bank daily and growth rate is accelerating
>600 clients join the Bank daily and growth rate is accelerating New-to-Bank daily sales Total clients & Business New business product mix and accounts1 accounts composition Primary Clients per day Primary Clients Total client base Savings only PAYT Credit & bundled fee Accounts per day Total Client
Slide 12: Performance levers
Growth Discovery Pay account Vitality Money Discovery Pay Miles Rewards and Travel x Deposits Behavioural Interest Advances correlations margin PERFORMANCE = Credit loss ratio LEVERS x Revenue/client Engagement + Utilisation + Fees Expense ratio Fixed costs Expenses/ client Discovery Bank Limited. R
Slide 13: The Vitality Money programme drives healthy balance sheet growth
The Vitality Money programme drives healthy balance sheet growth Foundation: Data, Behaviours Healthy balance sheet growth; superior financial outcomes and Tools 5 key financial behaviours Demand Interest Rates Deposits, Rbn Savings 9,05 Debt management 4.25% 4.24% Insurance 5,6 Retirement Property
Slide 14: Discovery Bank growth is best in class in deposits and advances versus neobanks
Discovery Bank growth is best in class in growth of deposits and advances after 28 months of operation when compared to other Neo-banks Discovery Bank Tyme Bank Monzo Nubank Chime 24-30 months after launch Launch date 2019 2018 2015 2014 2014 Multi channel Primary market Digital only Digital only Di
Slide 15: Performance levers
Growth Discovery Pay account Vitality Money Discovery Pay Miles Rewards and Travel x Deposits Behavioural Interest Advances correlations margin PERFORMANCE = Credit loss ratio LEVERS x Revenue/client Engagement + Utilisation + Fees Expense ratio Fixed costs Expenses/ client Discovery Bank Limited. R
Slide 16: Transaction volumes and engagement are growing strongly
Transaction volumes and engagement are growing strongly Total payments volume Total payments value #1 Card volume in HNW Engagement (‘000s) (Rms) segment Salary deposits 5,500 Millions 900 5,000 800 4,500 increase 700 4,000 600 3,500 J A S O N D J F M A M J J A S O 3,000 500 400 2,500 Debit orders 2
Slide 17: Discovery Bank NIR evolution
Discovery Bank NIR evolution Increase in spend and interchange income Bank Fee comparison NIR per customer from existing clients Gold segment Spend ( Existing clients in 2019) 168 99 109 110 115 120 above market average Bank 1 Bank 2 Bank 3 Bank 4 DS Y Bank 1 Transaction Suite 19 0 1 0 1 20 21 19 20
Slide 18: Discovery Bank is on-track for break-even by 2024
Discovery Bank is on-track for break-even by 2024 with strong revenue growth and expense efficiencies Over R1bn annualised revenue Expenses per client Key financial levers at break-even Rm Indexed to average of FY’19 Current relative metric 1000 110% 800 100% Advances R9bn R11bn 600 90% Deposits R14
Slide 19: Long-term economics – Business case sensitivities and scenarios
Long-term economics – Business case sensitivities and scenarios Limited growth Current run-rate Accelerated growth IRR= ±21% IRR= ±27% IRR= ±34% Earnings before tax Earnings before NB strain Earnings before tax Earnings before NB strain Earnings before tax Earnings before NB strain 2021 2022 2023 20
Slide 20: Strong growth against all performance levers
Strong growth against all performance levers Engagement and Efficiencies and Client growth Deposits Advances utilisation scalability New-to-Bank daily sales are Strong growth in deposits to R4.25bn in credit advances, Transaction volumes are increasing Expenses per client are below the above 600 per
Slide 21: Q1 2022 new initiatives
Q1 2022 new initiatives Forex Financial analyser Vitality Travel Discovery pay Discovery Bank Limited. Registration number: 2015/408745/06. Discovery Bank is an authorised financial services and registered credit provider. FSP number 48657. NCA registration number NCRCP9997.
Slide 22: Discovery Bank Forex Account
Discovery Bank Forex Account Open an account in 3 taps Tap add Select Foreign Transact in real time Open account account Currency Accounts ZE RO Zero fees for transferring between currencies $ € Manage foreign currency allowances in app Free Virtual Card Physical card for international spending R30
Slide 23: The Discovery Bank FX account has market-leading functionality
The Discovery Bank FX account has market-leading functionality DISCOVERY BANK Bank 1 Bank 2 Bank 3 Bank 4 Bank 5 Forex App Account fee (online) Free for Black + Purple Suite R180 once-off USD20 annually Free USD25 annually GBP10 monthly Free R15/m for Platinum + Gold Suite Minimum balance Zero USD10
Slide 24: Financial Analyser
Financial Analyser | The most comprehensive financial analysis tool in South Africa Detailed analysis and insights on income, expenses and savings Automatically categorise expenses in > 166 different categories Prepopulated budgets across categories and levels Analyse trends over time Transaction le
Slide 25: Discovery Bank has the most advanced budgeting tool in South Africa
Discovery Bank has the most advanced budgeting tool in South Africa Discovery Bank Bank 1 Bank 2 Bank 3 Bank 4 Bank 5 Other providers Automatic spend categorisation ✓ ✓ ✓ ✘ ✓ ✓ ✓ Monthly ✓ ✓ Trend analysis view ✓ ✓ ✘ ✓ ✓ 3, 6, 9, 12 month ✓ 12 months only 3 months only ✘ ✘ 3 months only ✘ view Budge
Slide 26: Vitality Travel
Vitality Travel | Access an end-to-end Shared-Value travel ecosystem within the Bank app Discounted flights Discounted accommodation, car hire and travel packages Full trip management including insurance and other add-ons Lounge access and Priority FastTrack Discovery Bank Limited. Registration numb
Slide 27: Discovery Bank has the most rewarding and exclusive travel platform
Discovery Bank has the most rewarding and exclusive travel platform DISCOVERY BANK Bank 1 Bank 2 Bank 3 Bank 4 Bank 5 Bank 6 • Up to 75% off • Up to 15% back • Flat R100 off booking • Up to 40% off • Up to 35% off (airline • None • None Six one-way R7 000 spend per Unlimited 16 one-way per family ne
Slide 28: Discovery offers significantly larger savings than competitors on all card colours
Discovery offers significantly larger savings than competitors on all card colours Return flight from Johannesburg to Cape Town with kulula.com Return flight from Johannesburg to Cape Town with FlySafair Discovery clients Discovery clients 3 000 3 000 +3% +2% 2 500 kulula.com not a travel partner 2
Slide 29: Digital transaction account and Vitality Money
Enables a fully functional digital account Digital transaction for all DHMS and Discovery Vitality account Clients at no monthly fee Financial wellness program facilitates Vitality Money single view of all client finances Dynamic interest rates Rewards better financial management J J A S O Enables f
Slide 30: Executive summary
Executive summary The Discovery Bank strategy was predicated on utilising the Discovery group assets and 3 key elements at launch in July 2019: Discovery • The shared-value banking model aligns client interests with those of the Bank to drive positive selection, deposit gathering and lower defaults