How Singapore’s banks are preparing for heavy competition

They live in hope with one crucial advantage over disruptors.

Today’s news headlines spur the impression that traditional banks will soon become obsolete as fintech firms are on the verge of taking over major roles especially on payments. We’ve seen a report about DBS CEO Piyush sharing that the biggest threat the banking industry currently faces is not the risk of bad loans, aggressive competitors, or capricious economic cycles, but the rising competition from outside the traditional financial sector. The likes of the top companys offering financial services, predominantly around payments, he said, are disrupting the value chain in finance.

DBS currently stands as Singapore’s largest bank, but does its chief’s opinion reflect the general mood in the banking industry? Are they losing sleep over this banking threat too?

In a three-part series, Singapore Business Review will present the views of other major banks about the scale of disruption that fintech firms bring to the sector.

In this first installment, we reveal that while banks acknowledge that fintech boom is shaking up the sector, they believe that it won’t kill them as they boast of one crucial non-tangible advantage they have over the disruptors.

Here’s what they had to say:

Sandhya, Head of Retail Products, Standard Chartered Bank Singapore

Recent reports have shown that the global mobile payment industry, which is predicted to be worth US$1 trillion by 2017, has been fast gaining traction and growing exponentially.

Singapore in particular is a leader in facilitating mobile payments by being the first city to initiate an integrated service for consumers and by embracing Near-field communication technology – a Wi-Fi technology that transfers data between devices. This makes Singapore an excellent launch pad for new banking products and services. Standard Chartered conducts R&D for new innovative banking products in Singapore, which is a leader in facilitating mobile payments, before launching them to the world.

Banks in Singapore are highly regulated and Standard Chartered places great importance on online security. Customers have peace of mind when they are making transactions and payments using our digital platforms. This is an extra value which banks can offer to clients.

Choong, Head of Community Financial Services, Maybank Singapore

Startups seeking alternative source of funding from Crowdfunding platforms (MoolahSense, CapitalMatch, FundedHere, etc) may not have much of an impact on banks. However, banks’ revenue would be threatened should such companies continue to resort to these non-financial
institution financing alternatives even after their credit profiles have improved.

Additionally, those providing such financing through these platforms may also be diverting part of their portfolio from traditional investments they hold with banks, hence also impacting revenue.

The Banking industry faces the same challenge we are seeing in other industries such as the taxi operators which they are facing competition from companies such as Uber and GrabTaxi. Differing regulatory requirements and standards mean that incumbents and the disruptors sometimes do not have a level playing field.

Nevertheless, banks have one crucial non-tangible advantage over disruptors and this is the element of trust from their customers. As a bank with 55 years of history, and a presence in all 10 ASEAN countries, our standing and strength in the market is something that customers can look to for assurance and reliability. Thus, banks must continue to build on this trust and ensure that it continues to deliver great customer experience in spite of challenges such as increased investment into regulatory compliance.

Melvyn, Head of ASEAN and Singapore for Treasury and Trade Solutions, Citi

Without a doubt, FinTech firms have speed, agility and an overarching culture of innovation. But, they also have their own set of challenges which include fighting to achieve scale and trust in a market where customer trust is the most important currency, and dealing with complex regulations when they kick in for them. These are areas that traditional banks have a head start.

We recognise that cybersecurity is an important component for successful digital money adoption. While financial institutions have taken significant steps to bolster cyber security efforts, they will continue to be challenged by the speed of technological change and the increasingly sophisticated nature of threats.

We are not taking any chances and we have invested an enormous amount of time, energy and resources to be ahead of the changing landscape.

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