Singapore has no shortage of financial products, and local banks have improved their processes and interfaces in recent years. Shannon Aw, Head of Business and Innovation and Growth at Synpulse, shares with finews.asia how upcoming digital banks can give the incumbents a run for their money.
A visit to popular personal finance websites such as MoneySmart or SingSaver would reveal that Singapore banks offer consumers a wide variety of loans, credit cards, and insurance products to choose from. The country's easily accessible digital infrastructure has also enabled traditional banks to deploy sophisticated solutions that are often the strength of digital banks elsewhere.
While incumbent banks have the scale and a wide range of offerings, it does not mean that there is no space for digital banks here, says Shannon Aw, associate partner and head of business and innovation and growth (Singapore) at Synpulse, in an interview with finews.asia. «I agree that Singapore is a bit overbanked and we have no shortage of local branches and retail products. Although the range of products is comprehensive, they are a bit homogeneous,» Aw observed.
Credit Available, But Access?
In a recent «Business Times» report titled «DBS confident of fending off digital challengers» (behind paywall), DBS Chief Executive Piyush Gupta said the availability of credit to SMEs in Singapore is «extraordinarily high.» So even if digital banks target potentially underserved players such as mom-and-pop stores and micro-SMEs, it is unclear how much profits can be made, given Singapore's small market size, Gupta noted.
«Credit availability is high in Singapore, but these options are not necessarily cheap,» said Aw. The success of new peer-lending players in Singapore (such as Validus Capital, Funding Societies, and Moolah Sense) mean there are meaningful segments in the market to serve.
Rise of Lending Platforms
According to website Valuechampion.com, Validus is able to offer competitive interest rates (8.7–26.8 percent per annum) and does not impose revenue requirements, unlike traditional lenders. Plus, Validus charges a lower cash disbursal fee of 1- 2.5 percent, whereas other platforms tend to charge 3 - 5 percent.
Elsewhere in China, Jack Ma's MYBANK has gained a meaningful market share of corporate loans to SMEs due to the fast approval process and attractive borrowing rates, as reported by finews.asia. The Hangzhou-based firm's operating cost per loan is about 3 yuan ($0.42), compared to 2,000 yuan at traditional banks.
Ensure Sustainability
Competition over deposit rates and property loans among Singapore banks in the past proves the point that higher-than-usual deposit rates or lower-than-peers' mortgage rates are not sustainable. Hence, it is not enough for new entrants to merely offer the same products at a lower price point.
«Being Asians, we are very value-driven, those 'me-too' digital banks may be able to convert a few existing bank clients, but I'm unsure if they can retain them,» he said.
Despite the wide array of banking products in the market, Aw thinks new entrants that can offer sustainable and unique products, and serve a variety of banking needs could succeed. In fact, digital banks that can offer higher perceived value with a lower pricing model could gain meaningful market share.
Focus on Key Offerings
Beyond the basic services and killer differentiation, digital challengers can also offer a core value proposition that resonates with millennials. «StashAway and Instarem are changing the way how we bank and manage our finances; the goal is not to be a one-trick pony. The port of call is to serve most consumer banking needs, but be anchored around one or two key offerings.»
Those with assets and ecosystems. Currently, ifast, SingTel, and Grab – all of which have expressed interest in applying for the digital banking license – fit these criteria.
«For example, SingTel can package their banking services with data,» said Aw. SingTel has recently bundled complimentary insurance with SIM card top-ups, as reported by finews.asia. Grab, with its near-monopoly of the ride-hailing market, has added food delivery services, hotel bookings, and a suite of micro-insurance products on its app, making it a possible winner.
Banks Must Change
To survive challenges, banks may have to change the way they do business. Today, when one intends to purchase a property, one goes to a property portal, speaks to a property agent, views the property, and then talks to a banker.
«In the future, banks may have to find a way for the customer to talk to a banker first, on what they can afford, before viewing. Given the symbiotic relationship with their ecosystem partners, banks may have to offer ecosystem partners special rates or early access to certain banking products.»
Otherwise, an over-dependence on ecosystems means banks could end up just being utility companies.
