Pandemic drives Singapore banks to accelerate digital offerings

In the middle of a crisis, the sector had to be quick and creative.

The pandemic has been challenging for Singapore banks as they navigate their way through economic disruptions and changing demands. In addition to implementing new work arrangements, banks also have to deal with their exposure to particular sectors which have been severely hurt by the crisis. How has the industry been coping, and what have they learned so far?

Singapore Business Review’s annual bank rankings for 2020 reveals notable changes amongst the top banks in terms of employee numbers. DBS retained the top spot with an employee count of over 12,000 as of April this year. OCBC jumped four spots to clinch second place with 10,032 employees. UOB fell one spot to third place but still maintained their employee count above 9,000. Standard Chartered, which shared the third spot with Citi a year earlier, slipped to fourth with around 9,000 employees. Rounding up the top five is Citi with 8,500.

Despite benefitting from a relatively stable economic and political environment, banks still have to navigate a rough operating environment brought about by the pandemic. In particular, Singapore’s three major banks—DBS, UOB and OCBC—are in danger of asset quality and profitability losses due to their exposure to a decaying playing field, according to a Fitch Ratings commentary. Whilst the cracks may start to show in 2021, forecasted impaired-loan ratios are sitting at around 2.5%, higher than the current 1.5%.

In early July, Fitch Ratings released another commentary placing the three banks on the negative rating watch due to the pandemic and the impact of the limited headroom in their viability-driven ratings. Further slowdowns or weaker recoveries in key operating markets may put additional pressure on their operating environments, the firm warned.

If anything, CIMB Bank Singapore chief executive Victor Lee stated that the crisis has instilled an urgent need for banks to be proactive and agile in times of unforeseen circumstances.

“We need to adopt an agile way of working, such as conducting online workshops, looking into business process reengineering and complimentary virtual learning so that our teams are constantly upskilling in order for the transformation journey we embark on,” Lee explained.

Even though CIMB’s commercial banking segment has been rather resilient, its SME clients have been thoroughly impacted. In order to help clients cope with loan restructuring, the bank has put in place several measures, such as deferment extension on both principal and interest until December 2020. Back in February, it rolled out its C-19 programme where eligible enterprises can avail of loans up to $5m with a 2-3% interest rate over a five-year period.

It has also increased its e-supply chain financing programme with a limit of up to $100m (US$71.6m) to grant sufficient working capital financing support for the suppliers community that is on the platform of its e-procurement service provider partner.

If there’s anything remotely positive about the current situation is that it has fast-tracked the adoption of digital payment methods, with the Lion City being considered as a trailblazer and a model across Asia Pacific. Singaporeans are now increasingly favouring contactless payment methods over cash, with 81% believing it is a better and cleaner way to pay, according to a Mastercard survey.

On top of that, a SingSaver study revealed that 80% of Singaporeans will stick to online banking even after the pandemic subsides. Interestingly, 69% of locals aged 54 and older have become comfortable with using online banking tools, the same percentage as those aged 35 to 44 but slightly higher than those aged 44 to 55 (67%).

The Monetary Authority of Singapore (MAS) is expected to hand out up to five digital banking licenses to 14 eligible applicants this year. Traditional banks don’t seem to be too fazed by the incoming competition given that the sector is a “hard ground” for digital newcomers, a UOB Kay Hian analysis noted, but a Moody’s report believes that small foreign-owned lenders may have a hard time adjusting.

“Digital literacy is clearly on the rise, and it is heartening to see that all age groups are picking it up fast. I don’t think that it will lead to the death of cash transactions, but I believe that the adoption of cashless transactions will surge, as customers are concerned about the hygiene levels when dealing with cash,” Lee said.

“Customers are also savvier when it comes to cashless payments and they trust that banks and merchants alike will implement tight security measures to ensure security on personal data,” he added.

In order to fulfill their customers’ need for digital services, CIMB has partnered with local chatbot provider Pand.AI to develop its own chatbot named Eva to assist business owners on enquiries regarding financial schemes that will help them through the crisis. As most of their banking products and services can be accessed online, the bank has hired a team that will look into any gaps in their digital services that need to be improved.

“What works for us is that most of our products and services can be accessed online, and with only two branches, customers can bank with us on their mobile phones from anywhere that is convenient for them,” Lee stated.

Maybank Singapore has also been taking advantage of the digital advent, in line with the Smart Nation initiative. The bank has granted initiatives to promote online services, such as cash rewards as well as waiving of fees for outgoing FAST and PayNow transfers. To help businesses accept PayNow payments, the bank has collaborated with Liquid Group for an all-in-one QR payment terminal for merchants to generate a dynamic QR code for each customer to scan and pay using PayNow.

Nevertheless, both lenders recognise that not everyone may be receptive to the digital disruption. There will still be people who are sceptical about cashless payments due to security and data protection and would rather stick to using cash, Lee said.

Maybank believes that education is vital in ensuring safe digital transactions.

“Whilst we recognise that the mature customer segment may prefer cash, the younger segment prefers to tap a bank card or scan their mobile phones to make a payment. Our aim is to ensure that no customer is left behind in this digital age by making our services user-friendly and educating our customers on how to transact digitally safely,” the bank’s spokesperson said.

Road to recovery
As the circuit breaker period eases, banks are eager to return to some semblance of past normalcy, whilst maintaining contingency measures adapted as response to the pandemic. Branches are being cleaned and disinfected and customers are reminded to observe physical distancing measures. Staff are going back to their offices, albeit slowly and limited in number.

Looking forward, CIMB will embrace what it calls the “CHIDA approach,” Lee said, meaning that the bank will take on a “customer-obsessed, high-performing, have integrity” attitude. The bank will also keep abreast of customer demands and will speed up the development of their digital initiatives on top of upskilling their employees and being an authoritative voice in the sector.

Maybank will gradually scale up operations in addition to reopening some branches and the resumption of select wealth and investment services as well as backend support, the spokesperson said. Aside from instilling in their employees a “hygiene and safety first mentality,” the bank is also willing to decentralise its operations through redesigning offices and allowing more staff to work offsite.

“We have put resources and initiatives in place to build a positive work culture and help them adapt to the new normal, enabling them to contribute their best,” the bank said.

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