They got here late and when they did arrive, they faced fierce rivalries from strongly entrenched incumbents. And given that they have to follow all the regulations traditional banks do, they are not getting a break from regulators either.
It was just a short while ago, in December 2020, after months of waiting, that the Monetary Authority of Singapore (MAS) announced four successful digital bank applicants, GXS Bank, owned by Grab and Singtel, MariBank, a unit of gaming and e-commerce group Sea, ANEXT, part of China’s Ant Group; and Green Link Digital Bank (GLDB), held by a consortium comprising Greenland Financial, Linklogis Hong Kong and Beijing Co-operative Equity Investment Fund Management.
And, they appear to be experiencing much the same fate that neobanks have elsewhere. In short, they won’t put any incumbents out to pasture anytime soon.
That same view now appears to be forming in the city-state itself, with The Business Times on Thursday also clearly telegraphing the fact in a stark headline that the four new digital entrants are not the game changers they initially promised to be. Their impact on the market has turned out to «be underwhelming, with limited utility for the average consumer», the newspaper indicated.
From the outset, Singapore intended to avoid any market disruption and regulators required digital banks to provide clear value propositions. Moreover, besides using innovative technology, they also needed to reach under-served segments of the Singapore market.
That has limited their availability – and impact. GXS Bank, for example, solely takes deposits from a select group of employees and customers, and MariBank is only available to employees of its parent company, Sea.
Another kind of digital bank, Trust Bank, is showing more impact, which is likely because it is supported by industry incumbents. It has a full bank license and is owned by Standard Chartered and FairPrice Group and only started to take deposits this past September, yet it was in a position to report 400,000 customers by the time the BT article appeared.
Moreover, another issue could potentially be in one of the key strategies used by digital entrants. Initially, in order to take a larger chunk of the market, Trust Bank and GXS tried offering higher interest rates than the main industry players.
But they quickly came up against one of the largest interest rate pivot cycles in recent memory, with more restrictive central bank policies worldwide forcing the wider financial industry to successively ratchet up rates in short order.
Not only have they been too late to the market, but the fact is that most traditional banks have significantly improved their digital offerings in the past two years. Any innovations offered by the new digital banks, such as financial planning and cheaper foreign exchange transactions, have become increasingly common.
Simon-Kucher’s banking lead in APAC, Silvio Struebi said in the earlier article that digital banks have accomplished a great deal, but that they are not going to be great disrupters.
It has just provided more options for consumers and prompted vast improvements in traditional banks, Struebi said.