Discovery Bank has introduced a new artificial intelligence-powered credit product designed to provide faster lending decisions for small and medium-sized enterprises, the South African digital bank announced on Tuesday. The product, called Discovery Bank Business Credit, integrates AI to assess a business's financial health and cash flow using transactional data from its bank account, aiming to reduce the time and documentation traditionally required for loan applications.

The launch represents a significant move by Discovery Bank, a subsidiary of the larger Discovery Group known for its health and life insurance products, to deepen its penetration into the business banking segment. The bank, which received its license in 2019, has built its consumer brand around a behavioural incentives model called Vitality, but has been expanding its suite of commercial offerings. This new credit product directly targets a market long considered underserved by traditional lenders in South Africa, where access to finance remains a key constraint for many smaller companies.

According to Discovery Bank, the AI model analyses 12 months of a business's transactional history to generate a credit limit, with decisions delivered in minutes. "The process is simple, fast, and requires minimal documentation because the underwriting is based on the business's actual transactional behaviour," a bank spokesperson said. The offering is initially available to existing Discovery Bank business clients, with plans to extend it to non-customers in the future.

The development aligns with a broader trend in South African fintech, where several players are leveraging technology to address gaps in business lending. Earlier this year, another South African fintech, Bridgement, secured R330 million in funding from a consortium of banks to scale its own AI-powered lending platform for SMEs. That round, announced in July, included investments from Standard Bank, Nedbank, and Investec, signalling institutional confidence in the model of using data analytics for credit assessment.

Industry observers note that while traditional banks have extensive SME client bases, their lending processes can be slow and collateral-heavy. Digital-native entrants and new products like Discovery's aim to compete on speed and convenience. However, the efficacy and risk management of these AI-driven models over a full economic cycle remain untested in the local market. Regulators, including the South African Reserve Bank, continue to monitor the evolution of algorithmic underwriting within the prudential framework.

For Discovery Bank, the product launch is part of a strategy to build a more comprehensive digital financial ecosystem. The group has historically used data and incentives to influence customer behaviour in insurance, and is now applying similar principles to banking and credit. The success of this business lending initiative could influence how other established financial groups in Africa approach digitising their SME offerings, a segment crucial for economic growth and employment across the continent.