It helps that digital banking penetration in the lion city is high at 97%.
Nearly eight in 10 banking customers in Singapore admitted that they would consider opening an account with branchless, digital-only banks, according to a report from management consultancy firm McKinsey.
Of this number, Singaporeans are willing to migrate more than a third or approximately 35% of the assets in their accounts to a digital wallet.
A separate report confirms these findings as Singapore ranks amongst the countries leading the rest of the world in its residents’ openness towards digital banking alternatives. In fact, Singapore scored the top spot for usage of online banking websites at 82.5% and ranked fifth in mobile banking app usage globally.
This comes as no surprise as Singapore has one of the highest digital banking penetration rates in developed Asia at 97%, giving rise to a large percentage of digitally active customers at around 80% of the population in 2017. “This trend shows the increased relevance of digital channels for day-to-day customer operations,” McKinsey noted.
“For banks, these changes represent both a challenge and an opportunity,” said McKinsey & Company partner and head of Asia Pacific digital banking practice Vinayak HV. “What’s clear is that they cannot rely on their existing business models and need to consciously invest to change their businesses in line with rapid changes in consumer sentiment and behaviour.”
Major banking players need to fine-tune their digital strategies in an effort to tap the increasingly online audience or risk losing patronage to mobile wallets who are quickly snapping up market share in India and Hong Kong.
DBS, for instance, is the first bank in Asia to develop a methodology measuring digital value creation. The report notes that DBS digital retail segment reports twice the income, 20pp lower cost to income ratio and 9pp higher return on equity than non-digital segments.
De-facto central bank Monetary Authority of Singapore is encouraging banks to embrace fintech as it presents a wealth of opportunities for banks to improve their profitability with studies suggesting that cost savings via fintech could yield 30% in costs.
“For Singapore banks, the cost savings are closer to 15% of their operating income,” SGX noted, adding that banks could face 5% reduction in operating income from lower payment transaction volume and margin erosion if they would not be open to the opportunities provided by new technologies.
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