Bank headcounts rise with tech talent boosting numbers

Banking staff at Singapore’s 18 largest commercial banks grew 5.47% in the last two years.

The search for tech talent has boosted the workforce numbers of Singapore’s banks. With MAS officially joining the virtual banking race, and each bank requiring hundreds of mainly tech related new hires, this trend is only likely to accelerate over 2020. Overall banking staff employed at Singapore’s 18 largest commercial banks grew 5.47% in the two years since our last survey, from 58,409 to 61,604. DBS retained the top position with 11,693 employees as of end-March, up from 10,460 in 2017. UOB followed in second place with over 9,000 employees and Citi rounded out the top three with a 9,000-strong workforce.

OCBC and HSBC came in at 4th and 5th place with 6,700 and 3,391 employees, respectively. Overall, the banks in the list have a total of around 61,604 staff in Q1 2019, from 58,409 in 2017.

Virtual banking race
With five new virtual banking licenses to be awarded, the battle for tech talent will only grow fiercer.

Months after Hong Kong granted eight virtual banking licenses, the Monetary Authority of Singapore (MAS) announced that it will grant two digital full bank licenses and three digital wholesale bank licenses that will cater to SMEs.

With licenses that are expected to be handed out by mid-2020, digital banks can open for business a year later. However, they are only limited to receiving $50m of deposits with $75,000 per account. Its potential customer base is also limited to business partners, staff, related parties and selected customers.

What this means, according to Maybank Kim Eng’s analyst Thilan Wickramasinghe, is that underserved segments such as the youth and new startups/SMEs are likely to find better access to financial products. “Traditional banking has generally focused on large, established businesses which require less risk capital deployment,” he said.

“Assessing credit quality for these customers is cumbersome, costly and often do not justify the return. However, virtual banks using lower cost operating models and data/AI enabled asset quality management, may be able to generate better returns from this segment. Supporting SMEs with deeper capital access will become an important driver.”

Although the savings from having no branch network to maintain may not be enough to pose a formidable threat to incumbents, suggested Wickramasinghe “That said, in Singapore, the domestic banks have been leaders in technology infrastructure investment regionally, and the gap between virtual and traditional is narrower,” he added.

So far, gaming hardware manufacturing company Razer, fintech startup InstaReM and wealth management platform iFast have expressed plans to join the digital banking race. Bloomberg also reported Grab and Singtel are considering the opportunity as well whilst OCBC is in talks with firms including Singtel.

Fintech firm iFast, in particular, is aiming for a retail banking licence. The firm boasts of having administered over $9b of customers assets as at end-June.
Lim Chung Chun, CEO of iFast Corp, said if his firm gets a license they will work on making the whole investment and transaction process a lot more seamless for their clients, from allowing them to earn better returns on their cash solutions, to lending to the companies. Lim also plans to look into partnerships with various companies in the payment and e-commerce space, to help meet the payment and related cash management requirements.

“As we have previously applied for the virtual banking licence in Hong Kong, we also have a team ready to work on the digital bank operation if we are granted the licence,” Lim added.

Big three will still lead
Even with five new banks set to enter the market, analysts don’t foresee any significant competition for the existing big 3 domestic banks.

Moody’s estimates the five digital banks will still remain small and could collectively command only 2% of domestic banking system assets after they become operational. The overall virtual banking sector could potentially dilute just 1.3% of incumbent bank earnings in 2021, according to Moody’s. When going up against the big three banks, the credit agency’s analyst Simon Chen said that the virtual banks’ impact will be quite manageable.

“The wave of new digital banks will increase competition and is credit negative for small foreign-owned incumbent banks in Singapore because these banks’ modest domestic franchises will face the greatest disruption risk by digital bank entrants,” Moody’s Chen added.

Wickramasinghe is even more sanguine than Moody’s, forecasting that the digital banks would only account for less than 1% of the SGD loan market share. The two digital retail banks will only make up for 0.3% of the market whilst the three wholesale challengers will take 0.9% market share, he added.
Since 2009, the big three banks have embarked on extensive digitalisation programmes. Their profitability around retail and SME banking are said to have improved as well. According to SGX, the average return on equity (ROE) for the three banks stood at 12.5% in H1, up from 12.1% in H1 2018.

Both UOB and DBS have even launched their own virtual banks outside of Singapore. DBS has its digibank in countries including India and Indonesia. In March, UOB launched its virtual bank called TMRW in Thailand and plans to progressively expand its roll-out across ASEAN. Susan Hwee, head of group technology and operations, said that UOB integrated digital engagement solutions from Israeli-based fintech firm Personetics, and Icelandic-based firm Meniga into their IT infrastructure to enhance TMRW’s capabilities.

UOB also upgraded its app UOB Mighty for its consumer banking customers in Singapore with plans to progressively roll out the enhanced app to Indonesia, Malaysia, and Thailand progressively. In Singapore, the bank also has a product catered to small businesses. Its BizSmart programme is an integrated suite of cloud-based business solutions that digitalises key operating processes such as payroll, sales, accounting and inventory management. It also aids businesses when applying for business loans in the bank.

“To be able to provide customers with a consistent experience, products and services across markets, we invested $500m from 2011 to 2013 to build a standardised IT platform across our network,” Hwee added. “From 2014 to 2018, we further invested $1.6b to deepen our technology capabilities in areas such as data, mobility and connectivity, regulatory technology and cybersecurity.”

Standard Chartered is also investing in digital, and executed a pilot transaction for a state-owned oil and gas company in Thailand with the first cross-border Letter of Credit (LC) issued over the Voltron blockchain platform for the oil industry. In January 2019, they have also completed its first blockchain-enabled cross-border supply chain financing in Singapore for Agrocorp, an integrated agricultural commodity and food solutions provider.

“Our trade finance capabilities and global footprint made it possible for this first blockchain-enabled transaction to be completed within 24 hours, significantly reducing the time it could otherwise have taken (5-7 days),” the bank told Singapore Business Review.

Chatty bots
Banks have been setting up innovation labs, promoting chatbots/mobile portals to enhance customer experience, and boosting the digital infrastructure. Such efforts, according to Robert Half’s managing director Matthieu Imbert-Bouchard, will be areas of tech hiring growth amongst banks.

As technologies increasingly reshape job functions, banks are actively retraining their workforce to handle the changes associated with the job. Standard Chartered introduced a $2m programme to retrain 3,000 employees by 2020 as part of an effort to future-proof its workforce against digital disruptions. In 2017, the bank embarked on the Professional Conversion Programme (PCP) and recruited 50 external PCP candidates since then. They have also offered PCP training and placement to 270 of its employees in 2018.

Since the launch of eXellerator lab in 2016 and SC Ventures in 2018 which aims to harness innovation from within the bank, invest in fintech start-ups, and establish new partnership and solutions, Standard Chartered has hired a diverse group of specialists in big data, data science, open banking, APIs and AI etc.

Following MAS’ announcement regarding digital banks, demand for functions related to software engineers, the demand for API integration architects, security, cloud specialist and UX/UI designers spiked, according to Shinjika Shukla, associate director at Michael Page Singapore.

“Tech hiring is on a rise as it has been in the last two years especially in Singapore. The demand of tech professionals with experience on emerging technologies is on an all time high as these are transferable skills and every industry needs such professionals to meet the needs of digitisation,” Shukla said.

Shukla mentioned that local banks, in particular, have been more actively searching for tech talent.

“The local banks continue to be the top technology hiring employers in the banking industry. Foreign banks are conservative in their hiring strategies and spends in Singapore due to various issues that impact at a global scale. Further, the foreign banks are still continuing to invest in their low cost location strategy for roles that can be worked remotely,” Shukla said.

Imbert-Bouchard added that local banks tend to approach hiring with more optimism and have increased the number of mid-level hires. And because of increasingly fierce competition for tech talent, hiring firms have noticed “extremely innovative and attractive” salary packages being rolled out in the last few months.

“Tech professionals with strong background in software programming and security have been able to command as high as 50% increment in their base salaries. Especially the local talent with strong technical software programming skills and problem solving abilities are being lured with attractive fixed monetary packages, high performance based/driven bonus structures as well as stock options, etc,” Shukla stated.

Tech professionals with skills in programming or security can command 50% pay bumps, noted Shukla, with an eFinancialCareers report noting banks offer $250,000 for director-level positions and $64,000 to $90,000 for analyst-level tech positions. Imbert-Bouchard added employers are giving higher grade titles such as Vice President for talent they want to retain.