is hoping to shake up the local banking sector by offering a decent interest rate on transactional account balances.
It’s a departure from the traditional set-up, which has seen Absa, First National Bank, Nedbank and Standard Bank offer minimal interest rates on transactional bank account balances – largely because these four dominant banks have been an oligopoly for years. Discovery chief executive Adrian Gore announced on Monday that Discovery Bank transactional bank account balances would have an interest rate of about 5% but could be 1.5% higher depending on a client’s Vitality status. Vitality is Discovery’s loyalty programme.This will put Discovery Bank in competition with Capitec’s leading position in this dimension. Capitec offers interest rates from 5% to 5.65% depending on the amount of money in a Capitec transactional account.
This means Capitec faces another new competitor as new rival Tyme Digital has come out with very low bank charges that in many respects undercut Capitec’s already low bank fees. Capitec’s critical competitive advantages that have seen it grow its total client base to more than 10 million are low bank fees and high interest on transactional balances.In response to Tyme Digital and other competition, Capitec on March 1 reduced its banking fees.Justin Brown
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