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Singapore

Digital banks offer higher interest rates, grocery rebates to pull customers from traditional banks

Unlike traditional banks where customers can make transactions at physical branches, digital banks operate entirely online.

SINGAPORE: Digital banks in Singapore are offering more than just higher interest rates to entice sign-ups in a market that is dominated by traditional banks.

Among their offerings, the banks are ramping up promotions and services to help clients offset higher inflation.

Unlike traditional banks where customers can make transactions at physical branches, digital banks operate entirely online.

They do not have automated teller machines (ATMs) to dispense cash, nor physical bank outlets.

DIGITAL BANKS DANGLE SIGN-UP PERKS

Trust Bank, which is backed by Standard Chartered Bank and FairPrice Group, attracted more than 300,000 sign-ups for new accounts in the three months since its launch in September.

It offered a free bag of rice with every bank account opened, along with rebates of about 20 per cent on grocery shopping. More than 10 per cent of its users are over the age of 65.

However, none of its customers are using Trust Bank as their primary account just yet.

“It is too early to talk about the deeper engagement of salary crediting and the other metrics,” said Trust Bank’s chief executive officer Dwaipayan Sadhu.

“Right now we're really focused on making sure that clients are actively using their credit card and the deposit account, that they are funding the accounts and they are having daily active and monthly active uses,” he added.

Meanwhile, GXS Bank, which is backed by ride-hailing firm Grab and telecommunications company Singtel, is only allowing selected customers on its wait-list.

Successful applicants will get an interest rate of more than 3 per cent on their savings accounts.

It has reserved a third of its client pool for Gen-Zs, platform workers and small businesses. The bank said it wants to offer micro-credit solutions for these customers.

“We see banking needs that are unfulfilled with these segments. We are able to look at offering financial services and products when customers are booking a ride, ordering food, or doing a remittance,” said Mr Charles Wong, GXS Bank’s chief executive officer.

SEA Group, which owns Shopee and Garena, is also making its foray into the digital banking market with MariBank.

Some pilot programmes have been launched for its Singapore employees, said SEA Group chief corporate officer Yanjun Wang, but offered no details on what these programmes are.

The Monetary Authority of Singapore (MAS) has recommended that digital banks that have received their licences start operations this year. But with 2022 drawing to a close, MariBank could potentially miss the launch target for the public.

CHALLENGING ENVIRONMENT

Non-bank players who received their digital bank licence will need to turn profitable within five years - a requirement set by MAS.

However, this will be challenging in the short term, especially with rising interest rates amid a potentially tough economic outlook, said INSEAD economics professor Antonio Fatas.

“People are not easily willing to change their bank account to somewhere else, because it's costly, because there's an issue of trust. So it's going to be hard for (digital banks) to get the scale,” Prof Fatas said.

“(These banks) need to start with niches where they can convince you that their value proposition is there. But most of the places where (these banks are, such as) here in Singapore and some other countries, typically are places where margins are very low,” he added.

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Source: CNA/dn(fk)

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