This comes amidst a steady stream of fintech investment.
The net profits of Singapore’s big three banks - UOB, OCBC and DBS - surged 27% YoY in Q4 amidst a steady stream of fintech investment charting their positive growth trajectories, according to a press release from SGX.
“In the 2018 year to date, the three banks have averaged a 5.9% price gain, following average total returns of 41.7% in 2017. FY17 net interest margin (NIM), which represents annualised net interest income as a percentage of total interest bearing assets, averaged 1.72% for the three banks,” SGX said.
Singapore is home to more than a third (39%) of the 1,228 fintech firms in ASEAN due to supportive regulatory policies and developed financial infrastructure.
In fact, the Monetary Authority of Singapore has stated that the advent of fintech presents a wealth of opportunities for banks to improve their profitability as studies suggest 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 a worst case scenario could spell 5% reduction in operating income from lower payment transaction volume and margin erosion if banks would not be open to the opportunities provided by new technologies..
However, this is not the case for Singapore’s big three banks like DBS which started its digital transformation journey in 2014 and launched a Singapore Innovation Lab in late 2016 to work in close collaboration with fintech startups.
OCBC, on the other hand, launched The Open Vault in 2016 to collaborate with third-party fintech firms to incubate and test ideas before their commercial release. Last March, the bank set up an in-house AI unit called AI Lab@TOV through an initial $10m investment. Similarly, UOB helps in nurturing fintechs through its accelerator programme The FinLab.
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