Traditional banking position in Singapore is shaken in the race to digitize


What is the position of traditional banking in Singapore shaking in the race to digitalize?

Banking digitization helps Singapore businesses better exploit the space of Asia’s leading financial market, especially when the demand for digital banking transactions increased during the Covid-19 era.

Customers visit Singtel retail stores in Singapore. Source: Shutterstock

Joint venture between Singapore’s largest telecom group – Singtel – and Grab caught the spotlight as one of the first to be licensed to operate digital banking. After applying for a license to operate digital banking for this joint venture, the representative of Singtel affirmed that the race to develop digital banking is aimed at bringing down traditional banks.

The alliance between Singtel and Grab is one of the four companies that have just applied for the first digital banking license in Singapore. These units are accepting deposits and providing banking services to corporate and retail customers, according to the Monetary Authority of Singapore.

“We are not like fintech startups trying to compete and compete with traditional banks,” said Arthur Lang, director of international sales at Singtel.

Singapore authorities say newly licensed digital banks will start operating in early 2022. The Singtel-Grab alliance plans to hire 200 job vacancies by mid-2021.

After information about a digital banking license, Singtel shares rebounded 5.6% in the morning session of December 7, in contrast, stocks of all three major banks listed in Singapore went down. Specifically, shares of United Overseas Bank lost 1.5%, while shares of DBS Group and OCBC fell 1.3% and 1.1%, respectively.

Mr. Arthur Lang assessed, traditional banks in Singapore unlike other markets because of them all have their own array of digital operations. Therefore, this helps them stay competitive with their competitors.

According to Singtel representative, “rookie” such as the joint venture between Singtel and Grab may not meet the banking demand in Singapore and the region, because the blockade measures during the Covid-19 era have caused the trend of digitizing service increases and users can see the benefits of digital transactions.

And Mr. Krishna Guha, an analyst with capital at Jefferies investment bank, assessed that the “newcomers” of digital banking in Singapore may be only a moderate threat to traditional banks. This expert still maintains a positive view on traditional banking stocks, specifically recommends buying shares of OCBC, United Overseas Bank, and supporting to hold DBS shares.

Meanwhile, Mr. Piyush Gupta, CEO of DBS said that Singapore banks have been moving digitally in recent years and Singapore is one of the best digital banking markets in the world.

“There is almost no piece of pieces in the Singapore market that has not been exploited or we have not penetrated”, Mr. Piyush Gupta stressed. DBS expert also said that he is always alert to the competition and carefully observes the “rookie” entering the Singapore banking market.

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