Latest news with #DiscoveryBank
IOL News
3 days ago
- Business
- IOL News
How financial stress impacts cognitive function and the role of education in South Africa
Discover how financial stress affects cognitive function and why investing in financial education is crucial for improving individual and societal economic health in South Africa. Image: Pexels A lack of financial health isn't just a personal problem – it's a societal crisis, trapping people in poverty, deepening inequality, and even impairing their ability to think clearly. High levels of debt and financial stress cut across income brackets, education levels, and job titles. There is no immunity: financial instability has become the norm, not the exception. Her Majesty Queen Máxima of the Netherlands, the UN Secretary-General's Special Advocate for Financial Health, made this very clear during her recent visit to South Africa, during which she had a round table discussion with guests that included two of our learners who had completed an online course through our partnership with Discovery Bank. In fact, it was during this session that the Queen went so far as to point to a peer-reviewed study, Poverty impedes cognitive function, which found that those who are already struggling financially and then become more anxious about money can lose as many as 13 IQ points. Financial stress literally reduces cognitive function and works out to about a 16% reduction in IQ for South Africans. This isn't isolated research. A paper published in the Journal of Economic Psychology just last year, Financial scarcity and cognitive performance: A meta-analysis, co-authored by several specialists in their field, noted that a lack of financial resources seems to have detrimental effects on cognitive functioning. The good news is that it also found that investing in financial education enhances cognitive functioning as well as improves people's financial situations. Our research, conducted across tens of thousands of learners referred from institutions like 1Life, Discovery Bank, and other major financial services providers, reveals the poor state of financial resilience. Only 35% of participants managed to spend less than their salaries, and just 42% reported having emergency savings. After a financial education course, two-thirds of learners are back to spending within their salaries, and 63% have emergency savings. It is, as Queen Máxima highlighted, exciting to see South Africa making progress in boosting financial health and intentionally moving away from focusing on financial literacy to pursuing financial intelligence and financial health instead. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ Ad loading A more financially inclusive economy also aligns perfectly with the Financial Sector Conduct Authority's (FSCA's) 2025-2028 strategy. The FSCA is focused on empowering consumers, improving market integrity, and fostering an all-encompassing, innovative financial sector. Their approach supports the UN's vision: people and communities should comfortably cover expenses, handle shocks, and plan for the future. The UN's aims with financial health programmes are to help achieve some of its Sustainable Development Goals, such as reducing – if not eliminating – poverty and inequality. Juxtaposed with this, the FSCA's strategy wants to improve industry practices to ensure fair outcomes for all financial services clients, foster an innovative and sustainable sector, act against misconduct, and help households and small businesses become more financially resilient – especially in an ever-changing digital world. Technology can expand access to financial health as well as make such services more accessible, innovations that Queen Máxima champions. The FSCA agrees but stresses the need for smart regulation. Their pending Conduct of Financial Institutions Bill aims to create a 'regulatory framework that is robust yet streamlined' and future-fit, ensuring consistent and predictable outcomes for all financial customers. Yet, legislation and laudable aims aren't enough. To turn these policy initiatives into real change, we have found the magic in how the capability of improving financial behaviour is intrinsically and authentically implemented through meaningful partnerships across the private, financial services, and education sectors. As business leaders, we have a responsibility to join this revolution to empower people to understand money and investing as well as make it possible for them to implement what they've learned, benefiting themselves, their families, and their communities.
News24
4 days ago
- Business
- News24
SpendTrend25: Why South African wallets are shrinking
Consumer spend on credit cards was muted, despite lower inflation, according to the SpendTrend25 report, a collaborative study by Visa and Discovery Bank. The report analyses credit card spend data across South Africa between 2019 and 2024, spanning 12 million credit cards and 2.6 billion transactions. Discovery Bank CEO, Hylton Kallner, says, 'Our latest comprehensive report identifies shifts in financial behaviour for practical insights into how much people spent, what they spent on, and how they spent it. We've also supplemented the analyses with detailed consumer survey data to gain a deeper understanding of the drivers of the trends that we're observing.' In 2024, inflation fell from 6% to 4.4%, yet consumer spending in South Africa remained flat. While we would expect lower inflation to mean more money to spend, the reality is far different. The SpendTrend25 report reveals a clear trend: many consumers are still feeling the pinch and with less money to spend, spending habits are shifting. Here's how… Rising costs and less disposable income Even though inflation has dropped, interest rates reached 11.75% and remained high for most of 2024. The cost of everyday essentials such as groceries, fuel, and utilities also continued to rise. This is putting a large portion of South Africans' budgets under pressure, leaving less disposable income for other purchases. According to the Euromonitor Voice of the Consumer, 86% of South Africans surveyed feel that the cost of everyday items is rising, which demonstrate the widespread impact of inflation and why it's harder for consumers to afford the things they need. Turning to retirement savings for relief In response to increasing financial strain, many turned to their retirement savings, such as the two-pot retirement savings system to provide relief for essential expenses. By January 2025, the South African Revenue Services reported that about two million South Africans withdrew from their savings pot with a total gross lump sum of R 43.42 billion paid out. The SpendTrend25 research among Discovery Corporate and Employee fund members found they are using their retirement savings for expenses such as home or car costs, paying-off short-term debt, school fees and daily expenses. Among Discovery Bank clients, two-pot withdrawal rates were inversely correlated with Vitality Money status. There were higher withdrawal rates for high-income earners with a low Vitality Money status than lower-income earners with a higher Vitality Money status, highlighting the importance of smart financial habits and sound financial planning. The shift toward value-based spending As consumers become more cost-conscious, value-based spending is gaining traction. 'We've seen a material shift to digital payments in our spend data, this is backed up by consumer preferences whereby over 80% of South Africans surveyed are choosing cards or digital payments over cash whenever they can, and the same percentage engage more with their credit card rewards and benefits than they did a year ago as they focus on value-based spending,' says Kallner. According to the Euromonitor Voice of the Consumer survey included in the SpendTrend25 report, up to 41% of local shoppers now buy more from stores where they have a loyalty card or store credit. The rising uptake and use of these benefits show that consumers want maximum value and offset rising prices by earning rewards or discounts. Discovery Bank has seen that of the key motivators for clients to adopt healthy financial behaviours with its Vitality Money programme, is the ability to book discounted flights and accommodation with Vitality Travel and pay less than the average consumer. Subscriptions to generate value Another shift in consumer spending is the rise of subscriptions. As people face financial pressure, whether from high living costs, interest rates, or stagnant incomes, they have to make careful choices about where to spend their money. Subscription services were once dominated by streaming. By 2024, they have now expanded to include artificial intelligence, sports bookings, and other eCommerce platforms. AI subscriptions saw the highest growth in the share of spend, growing over three times from last year. For Discovery Bank clients, the adoption of AI subscriptions such as ChatGPT and Perplexity have grown more than three times in 2024 compared with the previous year, further demonstrating the shift towards these recurring subscription services. Convenience at a price With busy lifestyles becoming the norm, convenience has become a big factor in how people choose to spend their money. The report highlights that spending on eating out and takeout grew by 12% in 2024 compared with just a 6% increase in in-store shopping. Added to that, it's much easier for shoppers to resist a tempting treat and stick to their grocery budget while adding to a cart on Checkers Sixty60 or Woolies Dash. This is supported by Discovery Vitality data, which shows that online grocery baskets contain 30% healthy food items, compared to 27% in-store. This shift suggests that, even while disposable income may be shrinking, people are still mindful of health-conscious spending, even when opting for convenience. But while convenience is a priority for many, it often comes at a premium, leading consumers to spend more on services that save them time but also increase pressure on their wallets.
The Citizen
27-05-2025
- Business
- The Citizen
Dipping into retirement funds could cost more than you think
Early withdrawals shrink your retirement savings and prevent them from growing, which can leave you financially short in the future. It's close to the end of the month. Bills are stacking up, and your bank balance is low. Maybe the car needs urgent repairs, or an unexpected medical bill has thrown off your budget. In these moments, many South Africans have found themselves asking: should they dip into their retirement savings to make ends meet? Unfortunately, this has become a growing reality for many, according to the SpendTrend25 report, a collaborative study by Visa and Discovery Bank, that takes an in-depth look at South African consumer spending habits. The two-pot retirement system allowed South Africans to withdraw a portion of their retirement savings, resulting in 1.9 million applications and R35 billion in withdrawals by November. By January 2025, the South African Revenue Services reported that about two million South Africans withdrew from their savings pots, with a total gross lump sum of R43.42 billion paid out. While this system was designed to assist people with life's emergencies and encourage them not to use all the funds on changing jobs, the decision to withdraw even some of it can come at a much higher cost over the long term. Impact on long-term financial security The SpendTrend25 report, including data from Discovery Corporate and Employee Benefits retirement fund members, shows the following: 24% of retirement savings were withdrawn to cover home or car costs 21% of withdrawals were used to pay short-term debt 20% went towards school fees, and 11% was used for other daily expenses. This reveals how people are using money intended for long-term savings to cover immediate costs, even as inflation eases. But this shift from saving for retirement to spending money on immediate expenses can result in retirement funds not growing as fast and financial strain during later years when these savings are needed. Withdrawing from long-term savings is not sustainable financial behaviour, which makes education on long-term financial management crucial across all income groups. The burden of taxes on withdrawals Despite warnings that accessing funds from the savings pot is costly, many South Africans were shocked to find that taxes were levied on their early withdrawals. Retirement fund contributions are tax-deductible, so any withdrawal, whether at retirement or before retirement from your savings component, is taxed as income. This highlights the need for more awareness regarding the implications. Missed opportunity for financial growth By withdrawing from retirement funds prematurely, individuals decrease the overall growth of their retirement savings over time. Contributions to retirement accounts typically benefit from compound interest or from earning interest on interest, which accelerates growth. Early withdrawals shrink your retirement savings and prevent them from growing, which can leave you financially short in the future. Financial tools and education can help to plan for the future To combat this issue, Vitality Money, Discovery Bank's behaviour-change programme that rewards people for managing money well, offers a solution. The platform helps clients track and improve their financial habits, making it easier to build emergency savings, manage short—and long-term debt, and have all the necessary types of cover to help manage all financial commitments. 'Discovery data shows a clear link between financial behaviours and retirement savings preservation. Higher Vitality Money statuses generally indicate better financial habits. For example, Discovery Retirement Fund members with a higher Vitality Money status are less likely to withdraw from their retirement savings,' says CEO of Discovery Bank, Hylton Kallner. While higher earners might seem less likely to dip into their retirement savings, the data shows a different trend. Withdrawal rates were higher among high-income earners with a low Vitality Money status than among lower-income earners with a higher Vitality Money status. This highlights a key insight: Smart financial habits matter more than income when it comes to protecting long-term savings. Financial tools and education can play a critical role in helping individuals manage their finances to avoid relying on retirement savings for short-term needs.
The Citizen
27-05-2025
- Business
- The Citizen
SpendTrend25: Why South African wallets are shrinking
In response to increasing financial strain, many turned to their retirement savings, such as the two-pot retirement savings system, to provide relief for essential expenses. Consumer spending on credit cards was muted, despite lower inflation, according to the SpendTrend25 report, a collaborative study by Visa and Discovery Bank. The report analyses credit card spend data across South Africa between 2019 and 2024, spanning 12 million credit cards and 2.6 billion transactions. Discovery Bank CEO, Hylton Kallner, says, 'Our latest comprehensive report identifies shifts in financial behaviour for practical insights into how much people spent, what they spent on, and how they spent it. We've also supplemented the analyses with detailed consumer survey data to gain a deeper understanding of the drivers of the trends that we're observing.' In 2024, inflation fell from 6% to 4.4%, yet consumer spending in South Africa remained flat. While we would expect lower inflation to mean more money to spend, the reality is far different. The SpendTrend25 report reveals a clear trend: many consumers are still feeling the pinch, and with less money to spend, spending habits are shifting. Here's how… Rising costs and less disposable income Although inflation has dropped, interest rates reached 11.75% and remained high for most of 2024. The cost of everyday essentials such as groceries, fuel, and utilities also continued to rise. This is putting a large portion of South Africans' budgets under pressure, leaving less disposable income for other purchases. According to the Euromonitor Voice of the Consumer, 86% of South Africans surveyed feel that the cost of everyday items is rising, which demonstrates the widespread impact of inflation and why it's harder for consumers to afford the things they need. Turning to retirement savings for relief In response to increasing financial strain, many turned to their retirement savings, such as the two-pot retirement savings system, to provide relief for essential expenses. By January 2025, the South African Revenue Services reported that about two million South Africans withdrew from their savings pot with a total gross lump sum of R 43.42 billion paid out. The SpendTrend25 research among Discovery Corporate and Employee fund members found they are using their retirement savings for expenses such as home or car costs, paying off short-term debt, school fees and daily expenses. Among Discovery Bank clients, two-pot withdrawal rates were inversely correlated with Vitality Money status. There were higher withdrawal rates for high-income earners with a low Vitality Money status than for lower-income earners with a higher Vitality Money status, highlighting the importance of smart financial habits and sound financial planning. The shift toward value-based spending As consumers become more cost-conscious, value-based spending is gaining traction. 'We've seen a material shift to digital payments in our spend data, this is backed up by consumer preferences whereby over 80% of South Africans surveyed are choosing cards or digital payments over cash whenever they can, and the same percentage engage more with their credit card rewards and benefits than they did a year ago as they focus on value-based spending,' says Kallner. According to the Euromonitor Voice of the Consumer survey included in the SpendTrend25 report, up to 41% of local shoppers now buy more from stores where they have a loyalty card or store credit. The rising uptake and use of these benefits show that consumers want maximum value and offset rising prices by earning rewards or discounts. Discovery Bank has seen that one of the key motivators for clients to adopt healthy financial behaviours with its Vitality Money programme is the ability to book discounted flights and accommodation with Vitality Travel and pay less than the average consumer. Subscriptions to generate value Another shift in consumer spending is the rise of subscriptions. As people face financial pressure, whether from high living costs, interest rates, or stagnant incomes, they have to make careful choices about where to spend their money. Subscription services were once dominated by streaming. By 2024, they have now expanded to include artificial intelligence, sports bookings, and other eCommerce platforms. AI subscriptions saw the highest growth in the share of spend, growing over three times from last year. For Discovery Bank clients, the adoption of AI subscriptions such as ChatGPT and Perplexity have grown more than three times in 2024 compared with the previous year, further demonstrating the shift towards these recurring subscription services. Convenience at a price With busy lifestyles becoming the norm, convenience has become a big factor in how people choose to spend their money. The report highlights that spending on eating out and takeout grew by 12% in 2024 compared with just a 6% increase in in-store shopping. Added to that, it's much easier for shoppers to resist a tempting treat and stick to their grocery budget while adding to a cart on Checkers Sixty60 or Woolies Dash. This is supported by Discovery Vitality data, which shows that online grocery baskets contain 30% healthy food items, compared to 27% in-store. This shift suggests that, even while disposable income may be shrinking, people are still mindful of health-conscious spending, even when opting for convenience. But while convenience is a priority for many, it often comes at a premium, leading consumers to spend more on services that save them time but also increase pressure on their wallets.
Daily Maverick
08-05-2025
- Business
- Daily Maverick
How to outsmart rising subscriptions so they don't break the bank
It pays to get on top of them before they blow your budget. I'm used to my annual Microsoft 365 Family subscription increasing by a nominal amount each year, but the 33% increase this year was a bit of a shocker. That's when I tapped into the genius of my loyal Money Cents readers – and found an alternative for just R1,199. According to the Discovery SpendTrend 2025 report, AI subscriptions saw the highest growth in share of spend, growing more than three times in 2024 compared with the previous year. Discovery Bank chief executive Hylton Kallner points out that the bank offers a subscription management feature that allows users to manage card links to subscriptions and services. 'This includes creating and managing virtual cards, viewing transactions grouped by card or device and suspending or deleting card links no longer needed. Users can also manage where their card information is stored digitally by merchants,' Kallner told me after reading last week's Money Cents newsletter. How to access the feature Log in to the Discovery Bank app. Select the 'cards' option and tap on 'digital cards'. Choose the digital card you want to view and then scroll to view all linked subscriptions and transactions. From there you can tap on a specific subscription to either suspend or delete it, managing your recurring payment. Lineshree Reddy, country manager for Visa South Africa, said there had been increasing take-up of e-commerce subscriptions such as TakealotMORE. 'Our research [the Discovery SpendTrend 2025] shows that 62% of South Africans subscribe to three or more streaming services, and 29% of South Africans are willing to pay for subscription services that offer discounts or exclusive offers,' she said. Examples of typical offers or services could include next-day delivery and early access to offers such as Black Friday sales. With the growth in subscriptions, Reddy said Visa had looked at ways to enable consumers to have a single view of payments across various merchants and where they are making payments. 'For example, kids today can subscribe to games on devices. The Visa subscription manager gives you a full view of where those transactions are happening and you have the ability to stop recurring payments,' she said. Here are five ways to manage your subscriptions, regardless of which bank you're with: Keep track: Go through your bills from the past six months or even as far back as a year, making a note of the subscriptions you are being charged for and the amounts. Make a note of this in your monthly budget and keep track as payments are debited. Look at the bigger picture: The monthly subscription that is 'just R50 a month' works out to R600 a year and if you have four subscriptions of that amount, that's R2,400 a year. It adds up faster than you can blink. Re-evaluate monthly: Netflix, Amazon Prime, Apple TV+, Showmax, DStv… You are spoilt for choice in terms of streaming subscriptions, but the beauty of these is you can cancel them and resubscribe at a moment's notice. Plan which series or shows you want to watch and unsubscribe from the services you are not using each month. Watch out for auto-renewals: Visit the sites you are subscribed to and uncheck 'automatic renewal' under payment options. Bundle it or share it: In this financial environment, sharing is caring. Consider sharing subscriptions with a friend or sibling. For example, one of you pays for Press Reader and the other for DStv. You get both benefits at a reduced cost. What you said Money Cents readers shared the following advice: Colleen said she contacted service providers to negotiate the annual increases. Gavin had interesting feedback: he makes monthly payments into a separate savings account, which then covers annual costs such as his motor vehicle licence, vehicle service, holiday club contribution and TV licence. 'The transfer is made early in the month so I'm only really aware of the remaining balance within which to handle normal monthly living costs. On the due date the funds are readily available,' he said. DM This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.
