What the rise of digital banks means for Singapore consumers

DIGITAL banks have been becoming increasingly ubiquitous around the world and Singapore took the first step towards digital banks with the award of licences for the new wave of digital banks in Singapore two years ago.

The pace of technology adoption in society has been nothing short of a miracle. It is nowadays difficult to find anyone who is not a part of the digital ecosystem – be it hailing a ride, ordering a meal or carrying out banking transactions. The usual cliches around digital being for the young are far from the truth. Of course, this has only been accelerated by the rapid adoption of digital services during the Covid-19 pandemic.

On the back of this development, digital banks are poised to transform the banking experience with personalisation, rewards and rich ecosystems as strong differentiators from the offerings of existing banks.

In September this year, Trust became the first of the digital banks to launch to the public with a range of retail products comprising a credit card, savings account and family personal accident insurance. More than 200,000 customers signed up in the first month, making close to one million transactions and redeeming more than 120,000 digital coupons on the Trust app.

The retail banking market in Singapore is well developed and the existing participants have invested heavily to build digital versions of their extensive product offerings and traditional services.

So given the digital standards being set by traditional banks, why is there still demand for new digital banks and what does the rise of digital banks mean for Singapore consumers?

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Digitally-native versus traditional

Let us first consider what’s different about the new wave of digital banks. Rather than transforming an existing business into a digital one, a digital bank is built from scratch, specifically to be digital. We call this digitally-native. A modern digitally-native bank uses the very latest and best technology to create a cutting-edge platform.

From a customer perspective, this creates some major benefits.

First, while many banks have invested heavily in digital services and sometimes created good-looking apps, the basic experience often feels like analogue with a digital wrapper. Sometimes we hear stories of bank accounts which can only be opened during branch hours when it is available digitally or accounts which must be serviced only at the branch even though it is supposedly entirely digital.

Of course, the banks know this and they would like to fix it but legacy technology platforms and complex architecture accumulated over the years make it very difficult to effectively digitise.

For a digital native bank, there is no legacy. Digital banks such as Trust must have the ability to operate 24/7, open accounts rapidly and do everything in real time, all backed by cutting-edge technology.

Secondly, it is a lower-cost model as there is no expensive legacy technology to maintain and no physical branch network to support. This allows a digitally-native bank to pass on more benefits to its customers. You can see this in digital banking propositions that include customer benefits such as lower fees, better deposit rates and no minimum balance requirements. These are not just financial benefits but also help to improve inclusivity, for example where customers are not consistently able to maintain a minimum balance in the savings accounts.

Thirdly, it enables an enhanced experience that is truly designed around the customer. For example, the latest technology gives customers real-time transparency on their banking and rewards. With a traditional model, customers sometimes have to wait until their end-of-month statement for information, by which time, it is no longer useful for decision-making.

In addition to these technology-based benefits, building a bank from scratch enables a new culture to be created that is agile and with minimal hierarchy. Coupled with the latest technology, this means a digitally-native bank can listen to its customers and deliver solutions to them very quickly.

Even with significant investment, these technology and cultural capabilities are hard to build for large organisations that have evolved over several decades.

The importance of an ecosystem partner

So far, we’ve just covered how a digitally-native bank differs from a traditional bank. However, a growing trend among digital banks is to build around an existing ecosystem.

Building around an ecosystem provides customers with an enriched and easy-to-use range of services that complement core banking services. This also brings together data from a wider range of sources to create a more personalised and relevant offering for the customer.

In Trust’s case, we are partnered with FairPrice Group, which includes the consumer rewards and loyalty programme Link Rewards. This ecosystem has more than one million customer interactions every day in Singapore, which our technology platform has enabled close integrations with from the start.

Due to their modern technology and agile culture, digitally-native banks are uniquely positioned to deliver the benefits of partnering an ecosystem to their customers.

What this means for consumers

While we are confident that the introduction of the new wave of digitally-native banks will raise standards and bring immediate benefits to consumers in Singapore, it is clear that this is just the beginning.

Digital banks will need to tap into their unique strengths to develop products which solve the real needs of customers. They should do this by continuously listening to them and building products which create value for them.

By adopting this approach, digital banks will be able to build an inclusive and strong proposition which will attract customers from all segments of society. The writer is chief executive officer of Trust Bank.