Singapore’s big three banks – DBS, OCBC and UOB – could face some competition from digital banks in the near term but remain well-equipped to hold ground, according to a recent Fitch report.
Net interest margins could face some near-term pressure due to digital banks’ aggressive pursuit of deposits and loans, according to a Fitch report, but their balance sheets are expected to remain small in the next one to three years with limited overall effect to the big three’s market share in the city-state.
On the other hand, the incumbent banks have already transformed to make the digitalization of account opening and, in some cases, loan approval a norm as tech spending increases.
Operating cost efficiency «compares well to some prominent foreign digital banks», the report added.
Long-Term Challenger
However, the longer-term outlook could change as virtual lenders could see tailwinds from additional funding, such as Grab’s SPAC listing which could potentially inject $4.5 billion to the firm which received a digital full bank license in a consortium with telecom operator Singtel.
In addition, digital banks are also increasingly seeking growth opportunities in emerging markets like Indonesia or the Philippines with an eye on pursuing financial inclusion of the unbanked or underserved.
«Both Grab and Sea (also a digital bank license holder) have made investments in Indonesia that could provide a base for expanding their financial service offerings in the country,» Fitch said.
