With the Monetary Authority of Singapore (MAS) recently announcing that it will issue up to five new digital bank licences, the entry of new digital players in 2021 is expected to add diversity and help strengthen Singapore’s banking system.
Seen as the next frontier in terms of innovation, digital banks are expected to offer the services of a traditional bank, and more. With all banking services done through the web and mobile, digital banks of today won’t have physical branches—but the potential is there for digital banks to offer innovative products.
For instance, due to its lower cost structure, digital banks can offer better deposit rates, and lower transaction fees.
More importantly, they’ll be able to offer a rich feature set, such as a customized experience for the clients, where they are able to apply Artificial Intelligence (AI) and Machine Learning to better cater to client needs.
Also Read: Singapore’s B2B marketplace Eezee raises funding from Insignia for Asia expansion
Additionally, they’ll be able to offer greater financial literacy and money management tools. This is important as with the number of user transactions growing, users often aren’t able to fully account and track their spending, with their only visibility being their bank balance at the end of each month.
It’s going to be an exciting journey for Singapore. This issuance of digital bank licenses to non-bank players is a major sign of change for our local banking scene and one that shows our nation is ready to embrace the transition.
However, it is important for Singapore’s financial services ecosystem to be ready to embrace this new banking environment—as only then will digital banks be enabled to become the norm.
While we are ready for digital banking, given the relatively quick uptake of e-payments and e-wallets, select banking services today are still very traditional—for example, having to go down to a physical branch to open a bank account.
The road towards a smart(er) nation
The adoption of digital banking has revolutionized the banking industry of China and the United Kingdom—and has fundamentally changed how banking is done. It’s likely to do the same for Singapore, which already has a strong and easily accessible banking infrastructure and no shortage of financial products.
In fact, we’re already seeing it in the traditional banks, who have started digitalising both their backend and front-end operations, even though they are saddled with legacy systems.
It’s definitely going to be a race against time, as digital banks will likely be able to come online as soon as twelve months from the issuance of the digital banking license—based on our experience working with our Taiwanese counterparts.
Digital banks will no doubt strengthen our banking ecosystem. Much like how e-commerce disrupted the retail industry and forced traditional brick and mortar shops to go omnichannel, the addition of new players will accelerate the banking industry’s growth.
Also Read: AI and blockchain: new tech frontier or simply incompatible?
This keen competition will force incumbent banks to become more competitive and step up to differentiate their offerings by offering newer, more innovative banking products at better rates—resulting in a better environment for everyone.
On the other hand, the rise of digital banking will also present traditional banks with new opportunities. For instance, traditional banks can partner with the new digital banks to offer their compliance and risk management services, as many consortiums might not have a full understanding of the back-office measures that are required.
Additionally, there can be crossover selling between the digital banks, insurance and traditional banks, which means that banks can use these new digital banks as another platform channel to sell their products.
Winning the trust of consumers
Existing local banks have earned the trust and confidence of their clients, as a result of decades in operational experience, a wide range of products and strong regulatory compliance.
To win over clients from their traditional counterparts, digital banks will first have to show at least the same level of governance and compliance as the banks. Besides innovative offerings and strong capital backing, it is important for digital banks to build their brand right from day one. This is critical as trust is fundamental in all banking institutions, as it involves people’s savings and hard-earned money.
In addition, they also have to stand out with innovative business models. Whether it is offering customized banking services at a good rate and anticipating customer needs in terms of banking services, or catering to the underbanked segment of micro and SMEs that need strong support in banking services to grow their business, digital banks have to find a way to stand apart from their traditional counterparts.
This is where technological innovation is key, and where having a strong partner will help.
Technology companies are likely to have a huge pool of customers across the region, and some have specific expertise in certain domains like AI, blockchain, customer analytics. As such, they’ll likely have technology that can enable and enhance a full standalone digital bank with modern infrastructure at a fraction of a cost and time to market.
Singapore is on the path to being a leader in digital banking, with the regulators already paving the way for innovation and technology to take centre stage in the country’s new banking environment. It’s up to banking players to prove that we can lead the way and remain innovative and relevant to end customers.
–
Editor’s note: e27 publishes relevant guest contributions from the community. Share your honest opinions and expert knowledge by submitting your content here.
Join our e27 Telegram group here, or our e27 contributor Facebook page here.
Image Credit: Zhu Hongzhi
The post Embracing Singapore’s digital bank shake up in 2019 and its consequences appeared first on e27.