After more than two years of thorough preparation, Singapore’s financial regulator recently green-lighted a small group of digital-only banks for launch in the city-state.
The timing of the rollout, however, could have been a little more benevolent. The new band of online-only lenders is heading straight into a turbulent environment of rising interest rates, a languid growth outlook and a plethora geopolitical anxieties.
At the same time, recent reports have indicated that customers are turning more cautious in making financial decisions.
Pre-pandemic, the incumbent banks may not have fully harnessed the opportunities presented by new technologies as much as they could. But with the health emergency confining their clients at home, they have seen the wisdom of ramping up their digital capabilities.
So will the new digital-only players gain a foothold in the market, gather a critical mass of customers and rack up sufficient revenue to be able to stay in the game?
In theory, virtual banks should be able to do their business at a fragment of the cost of the established banks. One hefty advantage they enjoy is that they do not have to establish physical branch networks and they can do with relatively fewer personnel to run the business.
Singapore, however, is a mature market, and with a population of under six million, many of the locals are already multi-banked. It is far too early to gauge how many consumers will adopt one of the new online lenders to be their main or supplementary banking provider.
Meanwhile, the established brick-and-mortar banks in the city-state have upped their own digital products and services.
Not only are they better prepared to retain their customers in the face of the online competition; the incumbents have also established solid track records of weathering significant crises – the Asian financial crisis, SARS, the global financial crisis, and the Covid-19 pandemic, to name a few.
Evolving market needs
Sunny Quek, head of consumer financial services, Singapore, at OCBC Bank, notes that the banking industry has continued to be innovative and agile in responding to evolving market needs amid the digital disruption.
“We have brought many digital firsts to Singapore, including instant digital account opening services for SMEs and consumers, robo-investments via OCBC RoboInvest, enabling real-time digital purchases of gold and silver, and offering a comprehensive suite of digital wealth solutions on our OCBC Digital app,” says Quek.
“In addition, we have been leveraging digital innovations such as blockchain and AI to enhance operational processes and deliver a superior customer experience.”
Even as digital adoption accelerates, customers may not just want to interact with banks via digital-only channels.
“For complex and deeper financial advisory conversations in wealth management, customers want the option of speaking with a real and qualified financial consultant in person,” he explains. “Customers from certain segments, like the silver segment, are also more dependent on our branch network for their everyday banking needs.”
“So, while we continue to ramp up our digital offerings on our OCBC Digital app, we need to invest in other customer touchpoints as well. Ultimately, banking is not just about transactions – it is about building relationships and trust that lasts, by understanding the needs of different customers and meeting them,” Quek adds.
Thriving on competition
Kevin Lam, head of TMRW and group digital banking at UOB, believes that competition brings innovation, which is good for the industry and consumers.
“UOB has been facing competition for the last 85 years, and we continue to operate on the foundation of trust and progressiveness and feel we are well positioned as a leading bank for consumers in Asean.
“UOB launched Asean’s first digital bank in 2019, TMRW, based on a new business model that is focused on customer engagement. TMRW was created to meet the banking needs of millennials and Gen Zs in a way that is in sync with their lifestyles and preference to bank on their mobile phones.”
First launched in Thailand, the UOB mobile app allows for end-to-end digital onboarding, and seeks to make saving and other banking activities more interesting via gamification.
“Leveraging data and AI, UOB TMRW provides personalized advice to users to help them grow their savings. The AI engine within the app picks up patterns in the user’s cash flow, including when the user’s pay comes in, and their regular expenses. When it notices that you have surplus cash during a certain time of the month, the AI can help you shift the extra cash to an insurance or investment account.”
Notwithstanding their digital capabilities, Lam stresses, traditional banks will continue to nurture their non-digital edge over their online-only peers. “It is important for UOB to not only focus on our digital investments but also ensure that we have the physical touchpoints for our customers. Ultimately, it is about nurturing our customers through their wealth creation journey to improve their financial lives and help them build long-term financial resilience.”