Digital era will force Singapore banks to be more transparent with customers
IF THE Singapore banks had missed the memo before, they will have no excuse now. Recent regulatory nudges have reiterated the message in plainer terms: the regulators want them to shape up on promoting financial literacy and planning here.
The latest signal comes as Singapore banks have been discussing among themselves ways to make it easier for consumers to have a full, aggregated view of their finances and enable consumers to switch easily between competing offers, be they in deposits, loans or investments.
The move comes as the Personal Data Protection Commission of Singapore and the Competition and Consumer Commission of Singapore set out a fresh discussion paper last week on data portability, putting on record that Singapore is studying the introduction of a data portability requirement.
This means individuals can request for a copy of their data held by an organisation such as a bank in a structured, commonly used and machine-readable format, and for the bank to pass on the data to another organisation, including a competing one. This requirement can lower switching costs, the authorities said.
This development follows a global trend of consumer-rights protection in the area of banking through greater transparency, known as Open Banking, and can cut to the heart of an unacceptable pain point of consumers, many of whom have found it difficult to track how much money they have as an individual or part of a household, and on the other side of the coin, how much they owe banks.
With the greater use of technology for round-the-clock and self-service access by consumers, it is increasingly hard for banks to sell services by being opaque about the true (or lack of) merits of their product offers.
What is much less acceptable today as well is the associated service fees that may be hidden from plain view and nestled in a sea of legalese in the form of terms and conditions.
Some fees should go: for example, why does it cost customers of certain banks here a fee to print out their bank statements only to submit them to organisations that still require hard-copy documentation checks? This service should not be a revenue generator.
With the government looking to eventually host a one-stop portal so consumers can log in and have a full view of their banking relationships, consumers should also be able to get a clearer picture of all the associated charges that come with services and make more informed choices about which banks are worth their while to stay with.
The call for greater standards from retail banks here comes at a time when fintech firms are on the prowl to eat their lunch. Regulators in Asia are open to having these new "banking challengers" come in to stir the banks out of their malaise.
Of course, banks here can take some comfort that consumers in Singapore in general are not as open as their peers in China in embracing fintechs for all their banking and financing needs. But that may change as more millennials enter the workforce and demand banking services that are mobile-friendly, flexible, and fit for their purpose.
To be sure, banks that are confident of their service standards in this digital era are more likely to stand their ground or increase market share and may, in fact, scale up at a quicker rate than in the past when they had to rely on brick-and-mortar expansion to generate footfall and sales through their branches.
The banks that can generate revenue through data analytics, while balancing the need for data privacy and protection, will be the biggest winners in this paradigm shift, as technology becomes the unequivocal new leveller in competition.
Conversely, banks that are holding on tightly to their market share by trying desperately to hold up barriers of entry will find themselves disappointed, and risk being left behind.
There is little room for protectionism today: it's artificial and temporary in the digital era.
The more enlightened banks would do better in partnering the industry to grow the pie collectively. Indeed, since there is greater need to boost financial planning, there is ample opportunity to sell risk-appropriate products to consumers for savings and investment needs, as Singaporeans will need to set money aside to account for a longer life span than the generations before.
But for banks that don't wise up to these larger trends in the wings, they risk missing this chance to find new growth in spite of disruptive forces. For these incumbents the next message for them would be: Be afraid. Be very afraid.
