The world’s first “behavioural bank” launched in 2020 and aimed to encourage good habits in customers that could improve their finances and overall wellbeing. So, four years later, what interesting insights could you learn from how the bank operates? Read on to find out.

Changing established behaviours is never easy. South Africa-based Discovery Bank noted that this often required compelling incentives, and realised that technology could be used to encourage lifestyle changes faster. For example, digital tools have made it easier than ever for people to track their fitness levels, and they may provide the motivation they need to establish routines that boost wellbeing.

Discovery Bank used behavioural research to create a new operating model.

The bank’s approach suggests that securing personal financial wellbeing isn’t just the responsibility of individuals, but of financial institutions too.

EY, which worked as a partner with Discovery Bank, states: “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.”

While it’s still relatively early days for the bank, its success with customers indicates its approach is working – in August 2024, it reached the milestone of 1 million customers.

Here are three ways the bank engages with its customers to inspire them to take control of their financial future.

1. Customers are encouraged to set goals and track them in real-time

One of the key features of the behavioural bank is that customers can use an app that evaluates their financial status and helps them set goals. Crucially, the app then tracks the progress against weekly goals and reports the results.

Being able to see the progress they are making in real-time could help some customers stay motivated, and it’s a simple way to hold them accountable for their financial decisions. For example, it can be tempting to treat yourself when you’re out shopping, but if you can see the effect that has on your goals, it could give you pause for thought next time you want to splurge.

Having a goal helps you understand how financial decisions could affect your future. It’s a step that could help you align the decisions you make today with the lifestyle you want to achieve over the long term.

This is why goals are at the centre of your financial plan. So, when you create or update your financial plan, reviewing your long-term goals is often essential – what do you want to get out of your assets? With aspirations defined, you can start to consider how to use your assets to create the life you want.

2. Incentives and rewards are used to nudge customers towards positive behaviours

Behavioural research consistently highlighted the importance of rewards. So, when creating their offering, Discovery Bank considered how to use this to nudge customers towards positive financial behaviours.

When customers meet their goals, they receive points and rewards, such as discounts on a range of items from food to airline tickets. In addition, incentives that may support financial wellbeing could be offered too. For example, after consistently saving, customers may be able to access a loan at a lower interest rate or finance a new phone through rewards.

As well as receiving rewards, if a customer falls into negative financial behaviours, they could lose benefits too. For some, it could motivate them to reassess how they’re using their assets.

You can apply this lesson to your personal finances too. Looking at your savings account to see how interest adds to your wealth could spur you to contribute more. Or seeing how the total value of your pension changes and how it may improve your retirement lifestyle might encourage you to boost your contributions.

As your financial planner, we could help you assess how positive financial behaviours now may lead to greater financial freedom in the future.

You might also want to set up rewards for when you hit certain milestones, from a meal out with your partner to a new gadget for your home.

3. There’s a focus on improving financial literacy

Another area Discovery Bank states is crucial for improving financial wellbeing is financial literacy – the knowledge and skills needed to make important financial decisions – especially among younger generations.

Understanding your finances means you’re in a much better position to make decisions that are right for you. Yet, finances can often be complex, you might need to consider:

• How saving in different accounts will affect your tax liability
• How much risk is appropriate for you when you’re investing
• How you can ensure your retirement income is sustainable.

As a financial planner, we’re here to explain your options without the jargon and help you understand which decisions make sense for you, so you can feel confident about your financial future.

Contact us to discuss how you could improve your financial decisions

If you’d like to talk about how you could get more out of your money and make progress towards long-term goals, please get in touch. We could work with you to create or update your financial plan to help you make financial decisions that reflect your aspirations.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.