The banking industry has evolved over the past ten years. In Asia, the growing demand for online alternatives is motivating digital players to shake up the market and transform the banking experience.
Gone are the days of queuing up at a local bank to open an account, make a deposit, transfer money or cash a check. As more advanced solutions and technologies emerge, digital banking is rapidly attracting millions of new customers.
In 2022, in addition to digital banking services, digital banks appeared in Singapore banking. This includes Trust, a joint venture between Standard Chartered and Fairprice, and digital banking offerings from Grab and Singtel.
What are the main differences between fully digital banks and conventional banks? Read on to discover the basic differences between digital and conventional banking and how digital banks are shaping the next breakthrough innovation in the financial services industry.
Key Differences Between Digital and Conventional Banks
One of the main features of a digital bank is that it has no physical branches and its services are offered exclusively over the internet.
In addition, a digital bank differs from a conventional bank in its range of services, customer base and account balance requirements:
|Digital banks||Conventional sofas|
|Scope of services||Mainly retail banking||Provides the full range of banking services|
|Customer service||24/7 chat support and ability to address critical issues||24/7 chat support, complex issues may take longer to resolve|
|Target customer||Mainly private customers (including SMEs)||All types of clients|
|Service Channels||Electronic Channels||
|Minimum account balance requirements / low balance fees||AFTER||At the choice of the bank:
|Interest rates on savings||Higher as an incentive to open a virtual savings and deposit account||Lower due to maintenance costs|
Both digital and traditional banks have their unique features and play a vital role in accessing or managing the accounts of the respective users.
Digital banks take a do-it-yourself approach where customers can serve themselves through various electronic channels.
While traditional banks offer the same do-it-yourself approach through digital banking services, they also provide customers with the opportunity for face-to-face interaction and servicing, which is necessary when it comes to more complicated financial transactions. On the other hand, however, this means that more costs are incurred on the bank’s side, which are passed on to the customer.
See also: Best bank accounts in Singapore
Everything you need to know about digital banks
Digital banking consists of all banking transactions that you can do online. Online direct deposits, checking your balance on mobile applications and transferring money between accounts online are all digital banking activities. Many traditional banks offer some digital banking services to their customers, but this does not qualify them as digital banks.
Digital banking brings all the traditional banking services performed in the physical premises to the customer’s digital device. It covers non-cash digital activities such as money transfers, deposits, withdrawals, account balance checks, account payments and investments linked to account checks.
Digital banking also provides an ecosystem to enjoy seamless banking services with speed, accuracy and convenience. It relies on different technologies to provide services through different interfaces.
There are three main benefits of digital banking.
There is no doubt that digital banking offers the ultimate in convenience as you can access your accounts at any time instead of scheduling banking activities within branch hours.
With digital banking apps more accessible these days, there are more useful tools to perform more detailed financial transactions at home. This autonomy in digital banking brings more favorable transactions to track your finances as you see fit and on schedule.
Due to lower overheads in managing digital banks compared to traditional banks, they operate at a much lower cost. Since all operations take place online, there is no cost to support branches to be open. As the cost reduction trickles down to the bank’s customers, there will be a significant reduction in accountable costs. This includes any monthly dues to your accounts, overdraft fees, and more. Digital banks then have more control over the money the customers invest, increasing the savings over time.
Higher interest rates
Digital banks usually offer attractive rates compared to traditional banks. This helps to increase the return on any savings account investments and helps customers reach their respective savings goals faster. Some financial institutions offer between 0.50% and 1% interest on their savings accounts, which is 10 to 20 times more than the base interest rates offered by conventional banks.
Integrating digital banking into our lives
Since digital technologies have played an established key role in most digital banks’ operations and customer relationships, digital collaboration is the practice of people working together through online means such as software-as-a-service (SaaS) platforms. Being a natural extension of the need to work remotely during the COVID-19 environment, it offers huge productivity gains and delights customers through greater speed and simplicity across a wide range of banking products.
More and more people today are turning to digital banking because of the ease, convenience and simplicity of digital banking. In addition, the customer-oriented approach and personalized service are important attraction factors for digital banks. Supportive government and regulatory policies have also acted as a catalyst for digital banks to play a central role in the cashless economy.
GXS Bank and Trust Bank in Singapore
Launched on August 31, 2021, GXS Bank is one of Lion City’s first digital banks for consumers and businesses. Backed by a consortium that includes Grab Holdings and Singtel, it offers a savings account with a customizable pocket feature that helps customers fill their wallets and reach their savings goals faster.
Because this app includes features to serve financially disadvantaged customers and drive a financial revolution for customers by using safe and ethical technology and data, it has given more customers the confidence to develop stable savings habits without too much commitment.
How does this work? GSX has enabled their customers to create up to eight “piggy banks” in their account and the ability to transfer money from their main savings account to these piggy banks. You will receive an interest rate of 0.08% on your main savings account and up to 3.48% per annum on each “Savings Bag”. In fact, interest accrues daily instead of monthly, so you can earn interest on your interest.
Just one day after the launch of GXS, Trust Bank, a partnership between Standard Chartered Bank and NTUC, launched Singapore’s newest digital banking platform. Trust Bank offers a well-rounded suite of savings, credit and protection solutions, including rewarding lifestyle offers and benefits, the credit card also has no annual, foreign transactions, cash advance and card replacement free of charge. With a Trust Bank savings account, one earns up to 2.5% interest per annum on the initial balance of S$75,000.
In addition, the Trust debit card empowers and empowers customers to enjoy great savings on daily necessities through integration with FairPrice Group’s Link Rewards program of
up to 11%. This allows customers to earn NTUC Link Points rebates faster.
As a bonus for Trust members, one is entitled to 1% bonus interest by making 5 purchases within that month with their Trust card. Union members receive 0.5% interest on their deposits up to S$75,000, and this is possible thanks to the partnership with Fairprice Group. With 1.5% base interest on a Confidential Savings Account, this gives you an interest of up to 2.5% per year.
Alternatives to digital banks (in terms of offers)
Best debit card for increased savings interest: UOB One Debit Visa Card
ValueChampion also offers similar services with the UOB One Debit Card with a high interest rate of up to 2.5% and 3% cashback on online shopping, groceries, health and beauty, convenience stores, transportation, food delivery and gasoline.
Low-risk starter account for young adults: OCBC Frank Savings Account
OCBC Frank Savings is a free starter account for young adults. Account holders earn on one of the simplest rate structures in the market: the first S$25k of a balance earns 0.10% per annum, the next S$25k (up to S$50k) earns 0.20% per annum, and all remaining amount (over S$50,000) earns 0.05% per annum
See also: Best cash back credit cards in Singapore 2023
Digital banks promise to remedy the shortcomings of the traditional banking system. The financial services industry continues to grow and more and more non-bank players are entering the market. As a result, banks have begun to rethink their strategies to ensure they remain relevant to modern consumers.
Traditional banks remain important to consumers with their personal care.
With the ever-increasing range of online banking services, it makes sense for conventional banks not only to focus on keeping digitally up-to-date by acquiring or collaborating with fintech companies, but also to provide personalized service. that traditional banks have offered in the past .
The article originally appeared on ValueChampion.
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