Back in 2020, we came to hear of four up-and-coming digital banks that are due to offer their services in Singapore.

So, who are those new digital banking Singapore players, and how would this rising wave affect the already saturated market? That’s what we set out to find.

Digital banking Singapore overview: Meeting the 4 new banks

Out of 14 eligible applicants, only four banks managed to pass the Monetary Authority of Singapore’s (MAS) criteria and get licensed.

These four banks could be classified into two broad types.

The first is a digital full banking (DFB) license that caters to a wide range of financial services, including retail customers. Meanwhile, the other is digital wholesale banking (DWB) license, with a narrower scope focusing on small and medium-sized enterprises (SMEs).

Let’s take a closer look at how each of the new digital banks fits in this classification:

Singtel and Grab’s GXS

GXS is a consortium between Grab Holdings and Singtel. The launch was back in August 2022, with saving accounts offered by September, successfully making it the first digital full bank in Singapore.

However, the bank will start rolling out its services for a selected customer base with an invitation-only system until it’s ready for more.

While it might be a bit too early to judge, GXS seems to be targeting freelancers in the growing gig economy, younger Gen-Zs, and merchants. This fits well with Grab’s enormous local and regional footprint in the private hire and food delivery segments.

It’s estimated that GXS could potentially onboard around 3 million customers.

Sea Ltd.

Sea already has a few digital banking services, like Shopee, Garena, and SeaMoney, for both SMEs and the youth market. So, it should be interesting to see how the company will integrate its DFB license into the mix.

Dubbed Maribank, Sea’s digital bank has not released much information or details of its service offerings at this time or writing. This is amidst Sea’s flagship e-commerce arm Shopee’s recent round of layoffs and rescinding of job offers.

Ant Group’s ANEXT

Ant Group is the Chinese fintech company behind the all-new ANEXT bank, which soft-launched back in June.

It was awarded a wholesale DWB license. So, it’s only natural to see how its services are very highly focused on SMEs and cross-border trade transactions with the ANEXT business account features.

Green Link Digital Bank (GLDB)

GLDB is a consortium between Greenland Financial Holdings, the supply chain platform Linklogis Hong Kong, and Beijing Co-operative Equity Investment Fund Management Co. Ltd.

Similar with Ant’s ANEXT, GLDB is also awarded a DWB licens. This also reflects on its SME-centered banking and supply chain financing solutions for businesses.

How can digital banks compete with hte incumbent competitors in Singapore?

The largest incumbent players in Singapore are the big 3 local banks DBS, UOB, and OCBC. Many of those banks already offer an extent of banking services through internet platforms or mobile apps. Yet, they could still find themselves facing quite the competition from full-fledged digital banks.

Let’s look at the competitive edge with online-only banking entities:

  • Cheaper account sign-up. Most digital banks require lower or no initial deposits for opening accounts, as well as no minimum balances maintenance requirements, which makes them a convenient option for youth and low-income segments.
  • SMEs get better offers. With competition in the market, SMEs can choose a digital bank that caters to the best niche and interest rates for their needs. Both ANEXT and GLDB are offering interest on their business current accounts, which are usually non-interest bearing for the local banks.
  • The pandemic pumped the accelerating pedal. Covid-19 framed online banking solutions as a convenient alternative to physical branches, leading to a surge of around 23 percent more customers signing up for digital banking services.

Would the new digital banks have to overcome any challenges?

The four digital banks had to beat ten other eligible applications in a merit-based process, which speaks volumes of their capacity and growth potential.

However, there are foreseeable challenges they will face.

Saturated market

Most of the local population is already well-banked.

Singapore has a whopping 98 percent of its eligible citizens who own bank accounts, and that estimate was back in 2017. That’s already a sign of a saturated market, especially when you consider that the global average is a mere 71–76 percent.

Imagine how over-saturated the market would be after opening up the arena for four new virtual banks!

It’s also estimated that the majority of the Singaporeans who are willing to give digital banking a shot will still keep their accounts with incumbent banks.

Each one of the digital banks will need to start carving out a niche (gaming, e-commerce, supply chain, SMEs, etc.) to upsell its services. Otherwise, the overlap in acquisition will not be scalable.

In the SME segment which all four digital banks will likely be competing in, there are already multiple banks serving this segment. Existing government financing schemes such as the SME Working Capital Loan also help SMEs access financing with participating financial institutions.

We also need to keep in mind that MAS could potentially grant more licenses in the near future, opening the door to even more competition.

MAS restrictions

According to the MAS, digital banks will be restricted until they undergo assessment and review. This review phase could take one or two years.

During that period, the DFB customers won’t really be able to get the full range of benefits and might have to deal with caps on deposits. On the other hand, services that include speculative trades are off the table for now.

However, if you’re only looking for simple credit and banking needs, odds are, you won’t mind the restriction phase.

Final thoughts

Although there are a few challenges along the way, there’s potential for the four new Singaporean digital banks to impact the market and satisfy untapped needs.

It might also push the incumbent banks to step up their game with more focus on customer experience!

Benjamin Teo is the Business Development Manager at Linkflow Capital.

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