The take up of digital banking services among the elderly is a very interesting finding and might come as a surprise to some extent because if you take most of the target segments that neobanks or virtual banks are looking at, they are mainly focusing on the gig economy, the self-employed and freelancers, youth and millennials and small businesses.
So this is an interesting point, but it remains to be seen if it will impact the strategies of digital banks. I actually doubt so, as many of them are considering introducing financial planning tools and wealth products for the youth.
What lessons can Singapore take from Hong Kong, having seen how digital banking has unfolded there?
I believe that getting the license is just the beginning of the journey. Banks can introduce the most creative product offering and introduce cutting-edge data, analytics or artificial intelligence technologies, but without the approval of regulators, they will be stuck in limbo. It takes around nine months to build a digital bank and introduce products, but they cannot proceed without permission from regulators. So regulatory compliance should always be at the top of your mind when you are introducing new products or technologies, and you need to assess how they will fulfill regulatory requirements and mitigate risks.
Banks also need to consider is the necessary risk management. You can introduce new technology capabilities and digital innovation, but to succeed, you need to know where to focus in terms of risk management. It’s quite different from traditional retail banks – when it comes to digital banks, there has to be a lot of focus on fraud risk and information security, and of course, for those who want to introduce credit products, mitigating credit risk should be a high priority.
What other challenges can be expected?
As we’ve seen from Hong Kong virtual banks, there’s a lot of competition among them in terms of products and services that are rolled out. Being able to offer 5-minute client onboarding is no longer special because everyone else is doing that. This is the same when it comes to products – every bank is doing numberless debit cards. But there are only so many customers.
«It’s challenging to fight for customers and come up with an exciting and differentiated offering»
It’s challenging to fight for customers and come up with an exciting and differentiated offering. You need to consider how you can really appeal to your target demographic and bring out that «wow factor.» This will only get more challenging with the rising competition in the market.
Xuna Shao is a Manager at Synpulse Management Consulting, She has eight years of banking and consulting experience in both Singapore and Hong Kong, and has in-depth understanding of retail banking products and regulatory requirements related to digital/virtual Banks. Her core expertise includes Asset & Liability Management, Data Analytics and Statistical Modelling, Data Governance, Risk Management and Regulatory Reporting.
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