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SINGAPORE banks must now innovate in this challenging environment where economic growth is uncertain, and disruptive forces are now at play, said Prime Minister Lee Hsien Loong on Thursday.
"Our banks are in a strong position," said PM Lee at UOB's 80th anniversary dinner, noting that Singapore is at the heart of a rising Asia, and banks here have a strong balance sheet.
"But at the same time, this is a very competitive business that continues to evolve rapidly. For while overall our banks are very good, in almost every specific area, we can find others who are better than us."
Looking at China's success in mobile payments, PM Lee pointed to the Alibaba sales on Singles Day on Wednesday, where 70 per cent of the billions in sales were done through mobile purchases.
Technologies such as blockchain, which can be used for real-time gross settlement or trade finance verification, are also emerging, he said.
"We have to continually innovate and keep up with the latest technologies and services."
Singapore's financial sector was liberalised from 1997, partly as the industry was not as efficient, innovative, and responsive to the market as it should be, said PM Lee. Foreign banks were allowed into Singapore to compete, including in domestic retail banking.
"This more competitive environment forced our local banks to consolidate. But it also spurred them to upgrade, innovate and grow," he said.
"Our strategy has worked. Today, our three Singapore banks have gained a reputation for being amongst the strongest and safest financial institutions in the world. And we have a strong, vibrant financial sector that we can be proud of."