Digital banks won't be a threat to big Singaporean banks: analyst

Singapore poses as a hard-ground for virtual entrants.

Singapore’s traditional brick-and-mortar banks face “manageable impact” from digital-only banks, with the country’s banking industry posing as a hard-ground for the virtual entrants, reports UOB Kay Hian.

A total of 21 applicants are vying for two digital full bank licenses and three digital wholesale licenses. The Monetary Authority of Singapore (MAS) is set to announce the list of successful applicants in June, and these applicants’ are expected to commence business by mid-2021.

Traditional banks are more than ready to face the competition, whilst digital-only banks could find Singapore a hard ground to break through.

“Singapore banks are digitally savvy. They are prepared to meet increased competition, having embarked on digital transformation since 2014. DBS was recognised as the World’s Best Digital Bank by Euromoney twice in 2016 and 2018. UOB was recognised as the Best Digital Bank in Singapore and Thailand by Asiamoney in 2019,” said UOB Kay Hian analyst Jonathan Koh.

In fact, traditional banks remain the preferred primary account for most consumers, said Koh. For example, a study by McKinsey noted that digital banks accounts for only 5% of retail consumers in Western Europe and the US.

Further, face-to-face interactions are still required for complex financial products. Whist 80% of all touchpoints occur digitally, only 25% of sales are closed through digital channels (20% online, 5% mobile), noted Koh.

“Banks must adopt an omni-channel approach to effectively engage customers digitally and through physical interactions,” he noted.