Although Singapore is already well-served by existing banking products, some experts are convinced that underserved segments in the region could allow digital bank entrants to thrive and offer up new propositions.
While many banking analysts and consultants do not think that new digital banks arriving in Singapore could drastically shake up the banking landscape here, few would disagree that the real battle lies beyond the small island state.
As Singapore's banking regulation is the most advanced in the region, digital banks operating in Singapore can get a branding advantage when they start to expand from here, due to the high threshold set by the Monetary Authority of Singapore (MAS). «Operating in a reputable country could be a differentiation factor,» said Chia Hock Lai, president of Singapore Fintech Association (SFA) in an interview with finews.asia.
Game Plan
The game plan for these new players is not necessarily within the city-state, but in Southeast Asia, which is home to around 640 million people. Most people in this region still trust established banks rather than unknown names, Chia notes. For some countries in this region, as many as half the working adults are reported to be under-banked or unbanked.
Ridesharing company Grab for example, which has applied for a digital bank license together with Singtel, saw the opportunities of the unbanked in the region some years ago. It has since gained e-money licenses in various Southeast-Asian countries such as the Philippines and Indonesia.
Beyond Local Borders
With the low-cost funds available in Singapore, digital banks may look to lend money outside of Singapore's borders, where they could get returns higher than those dished to local firms, Chia adds. The market for lending via digital channels is expected to more than quadruple to $110 billion (S$149 billion) by 2025, according to a report by consultancy Bain, Google and Temasek.
Letting Singapore become a base for these players as they grow in the region would improve banking services at home and in other parts of Southeast Asia, Ravi Menon, managing director of the MAS has said.
Evolving Needs Not Addressed
Even in Singapore, where financial products are entrenched, conventional banks have not kept up with the evolving needs of small-medium enterprises, said senior analyst Zhi-Ying Barry at Forrester, in a research report released in December. «They do a poor job of helping business owners get loans, manage cash flow and payroll, and receive financial insights and advice,» wrote Barry.
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