As virtual banking looms in Singapore, incumbents must prove digital mettle

Singapore

AS THE drums sound louder on the landing of virtual banks in Singapore, analysts are warning that incumbents need to squeeze more from their digital pursuits to fend off the attack by large fintechs.

Two issues are worth close attention. The first is how incumbents are using technology to significantly grow their top line, instead of simply lowering costs for commoditised services; the second issue is the sustainability of efficiency gains from digitalisation.

An Accenture report this month said that digital-focused banks - numbering just one in eight global banks it surveyed - are enjoying a higher market premium and better returns on capital.

The study, which had looked at the largest 161 retail and commercial banks in 21 countries (including Singapore), had a key caveat - that higher profitability is coming from better operating leverage, which means getting mor…