Banking has developed over the last decade. In Asia, the growing demand for online alternatives motivates digital players to shake up the market and transform the banking experience.
Gone are the days when you queue at a local bank to open an account, make a deposit, transfer money, or cash a check. With more state-of-the-art solutions and technologies arising, digital banking is attracting millions of new customers at an accelerating rate.
In 2022, other than digital banking services, digital banks made an appearance in the banking scene in Singapore. This includes Trust, a joint venture between Standard Chartered and Fairprice, and Grab and Singtel’s digital bank offering.
What are the key differences between fully-digital banks and conventional ones? Read on to discover the basic differences between digital and conventional banking and how digital banks are setting the next frontier innovation in the financial services sector.
Key Differences Between Digital and Conventional Banks
One of the key characteristics of a digital bank is that it has no brick-and-mortar branches, and its services are offered solely through the internet.
Besides, a digital bank differs from a conventional bank in the range of services, customer base, and account balance requirements:
| Digital Banks | Conventional Banks | |
|---|---|---|
| Scope of Services | Mainly retail banking | Handles full range of banking services |
| Customer Support | 24/7 chat support and ability to address critical issues | 24/7 chat support, complex issues may take longer to resolve |
| Target Customer Audience | Mainly retail clients (including SMEs) | All types of clients |
| Service Channels | Electronic Channels |
|
| Minimum Account Balance Requirements / Low Balance Fees | N.A. | At the discretion of the bank:
|
| Interest Rates On Savings | Higher as an incentive to opening a virtual savings and deposit account | Lower due to cost of maintenance |
Both digital and traditional banks have their unique specificities and play a crucial role in accessing or operating the accounts of the respective users.
Digital banks adopt a do-it-yourself approach where customers can self-serve through various electronic channels.
While traditional banks do offer the same do-it-yourself approach through digital banking services, they also offer customers the opportunity for face-to-face interaction and servicing, which is required when it comes to more complicated financial transactions. On the flip side, however, this means that there will be more cost incurred on the bank’s side, which will be passed down to the customer.
Related: Best Bank Accounts in Singapore
All You Need to Know About Digital Banks
Digital banking consists of any banking transactions you can do online. Online direct deposits, checking your balance on mobile applications, and transferring money between accounts online are all digital banking activities. Many traditional banks offer some digital banking services to their customers, but this does not qualify them as digital banks.
Digital banking brings all the traditional banking services performed at the physical premises to the customer’s digital device. It covers cashless digital activities like fund transfers, deposits, withdrawals, account balance checks, bill payments, and investments linked to account checks.
Digital banking also provides an ecosystem to enjoy seamless banking services with speed, accuracy, and ease. It relies on different technologies to provide services through several interfaces.
There are three main perks of digital banking.
Convenience
It is without a doubt that digital banking provides the ultimate convenience since you can access your accounts at any time instead of planning banking activities within a branch’s operating hours.
With digital banking apps that are more accessible nowadays, there are more useful tools to carry out more detailed financial transactions at the leisure of your home. This autonomy in digital banking brings more favourable transactions to track your finances on your own accord and schedule.
Lower Fees
Due to lower overhead costs in managing digital banks compared to traditional banks, they operate at a much lower cost. As all operations run online, there are no costs to support branches to be open. With the reduction in costs trickling down to the bank’s customers, there will be a significant reduction in fees required to be accounted for. This includes any monthly dues on your accounts, overdraft fees, and more. Digital banks will then have more control over the money the customers invest, adding more to the savings over time.
Higher Interest Rates
Digital banks usually offer compelling rates compared to traditional banks. This helps to increase the return on any investments made from savings accounts and helps customers to reach their respective saving goals faster. Some financial institutions offer between 0.50% to 1% interest on their savings accounts which is 10 to 20 times more than the base interest rates offered by conventional banks.
Integration of Digital Banking in Our Lives
As digital technologies have played a well-established key role in most digital banks’ operations and customer relationships, digital collaboration is the practice of people working together through online means like software-as-a-service (SaaS) platforms. As it has provided a natural extension of the need to work remotely during the COVID-19 environment, it offers tremendous productivity gains and pleases customers through greater speed and simplicity across a broad range of bank products.
More and more people are today turning to digital banking due to the ease, convenience, and simplicity of digital banking. Moreover, the customer-centric approach and personalised services are major attraction factors for digital banks. The supporting government and regulatory policies have also acted as a catalyst for digital banks to play a pivotal role in the cashless economy.
GXS Bank and Trust Bank in Singapore
GXS Bank
Launched on 31 August 2021, GXS Bank is one of Lion City’s first digital banks for consumers and businesses. Backed by a consortium including Grab Holdings and Singtel, it offers a savings account with a customisable pocket feature that can help customers topping up their pockets and reach their saving goals faster.
As this app includes features to serve financially underserved customers and drive financial revolution for customers by using secure and ethical technology and data, it has boosted confidence for more customers to develop stable saving habits without too much commitment.
How does this work? GSX has allowed their customers to create up to eight “Savings Pockets” in their account and the ability to transfer funds from their main savings account into these pockets. You can get an interest rate of 0.08% on your main savings account and up to 3.48% per annum on each “Savings Pocket”. Even better, interest is accrued daily instead of monthly, so you can earn interest on your interest.
Trust Bank
Just one day after the launch of GXS, Trust Bank, a collaboration between Standard Chartered Bank and NTUC, launched Singapore’s newest digital banking platform. Trust Bank offers a well-rounded suite of savings, credit, and protection solutions, including rewarding lifestyle offers and benefits, the credit card also has no annual, foreign transactions, cash advance, and card replacement free. With a Trust Bank savings account, one earns up to 2.5% interest per annum on the first S$75,000 balance.
Additionally, the Trust debit card enables and empowers customers to enjoy great savings on daily necessities via integration with FairPrice Group’s Link Rewards program of
up to 11%. This allows customers to earn NTUC Link Points rebates at an accelerated rate.
As a bonus for Trust members, one is entitled to 1% bonus interest by making 5 purchases using their Trust card within that month. Union Members get to enjoy 0.5% interest for their deposits of up to S$75,000, and this is possible with the partnership with Fairprice Group. With 1.5% base interest on a Trust Savings account, this will give you an interest rate of up to 2.5% per annum.
Alternatives To Digital Banks (In Terms of Offerings)
Best Debit Card for Boosted Savings Rate: UOB One Debit Visa Card
ValueChampion also offers similar services with the UOB One Debit Card with a high-interest rate going up to 2.5% and 3% cashback on online shopping, groceries, health and beauty, convenience stores, transport, food delivery and petrol.
Low-Risk Starter Account for Young Adults: OCBC Frank Savings Account
OCBC Frank Savings is a fee-free starter account for young adults. Account holders earn according to one of the simplest rate structures on the market: the 1st S$25k of a balance earns 0.10% p.a., the next S$25k (up to the S$50k mark) earns 0.20% p.a., and any remaining amount (beyond S$50k) earns 0.05% p.a.
Related: Best Cashback Credit Cards in Singapore 2023
Conclusion
Digital banks promise to overcome the shortcomings of the traditional banking system. The financial services industry continues to grow, with more non-bank players entering the market. As a result, banks have started rethinking their strategies to ensure they remain relevant to modern consumers.
Traditional banks, with their personal care, remain important to consumers.
With the ever-growing range of online banking services, it’s wise for conventional banks to not just focus on keeping up to date digitally by acquiring or partnering up with Fintech companies but also retain the personalised service that traditional banks have offered in the past as well.
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The article originally appeared on ValueChampion.
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