digital retail banks have made their debut on the Singapore banking scene. What makes them different from traditional banks and should you be putting your money in one, I'm sona Ramesh from the money mine team with the five things you need to know about digital banks joining me ceo of trust bank. Now this digital bank is backed by Standard chartered and Fair price. We have Reuben Lai head of regional office at G excess bank, that's the digital bank joint venture between grab and Singtel.
I'll also be hearing from partner at. So my first question is what's the difference between digital banking and a digital bank? I mean people already using digital options with traditional banks so what does a digital bank offer? That's different. There
are a lot of digital banking services that we in Singapore use but what we find is many of these services are built on very analog old school brick and mortar processes. So while there is a digital wrapper around it very often the experience that you get is not as seamless, not as real time as what you've come to expect from a digital bank as a digital native bank. We are looking to build very intuitive user interfaces which clients would love to
interact with and would love to banquet. But secondly also equally importantly we are deeply integrated into the NTUC fair price ecosystem and this allows us to get opportunity of interacting with one million client experiences every day.
First we believe in the ecosystem approach and for us us embedding banking into the everyday life of a customer, be taking a grab right ordering, grab food or making phone calls or using intel's internet broadband. We want to make banking part of the entire experience that also allows
us then to create products that are very unique. For example, if one changes address and change their telco building to a different address, we might be able to guess that the person has shifted and we might make them an offer to say that given that you've shifted address, would you like a housing loan to renovate your place? And that creates a very seamless and beautiful experience for our customers.
The second digit bank may sound like a robotic bank but there's the complete reverse of what we wanted to be. In fact we want to bring back service into banking. We've got 24 7 customer service hotline that allows our customers at any point in time. If you face any issues, just call up there will be a friendly customer service representative to help our customers.
If you look at the current banking products in Singapore, you have access to many products and services. But what you feel is that very often you don't have a great experience when you're using them. Take an example of rewards. Many banks. All banks are offering many rewards programs and these rewards comes with these terms and conditions. But today the banks are more or less expecting clients to keep track of the terms and conditions. Maybe
you need to keep it offline. Maybe you need to keep a spreadsheet but you need to keep it yourself. So how are you innovating? We are giving the entire control of the rewards journey in your hand. So in your mobile app you can realtor and see where are you on your rewards journey. What do you need to do in order to maximize your reward? We never want you to lose out on your rewards
ever again. Or for example, you take transparency. We have removed every hidden fee from our product and we have built transparency as a cornerstone of our proposition and we believe that a combination of these two would really help us differentiate and possibly create a new space for us in this banking market,
almost every adult in Singapore already has a bank account. Do we really need a new type of bank? Singapore is well banked, you're right, but well banked does not mean well served. I spent a lot of time with our customers to grab drivers to grab micro merchants. The retailers, small retailers that are trying to build their business and looking for access to funds to expand their businesses. Many of these folks tell us that that the current banking system does not serve them well.
It doesn't accommodate to their businesses and their needs. Let me give you an example. Many bank accounts in Singapore may give multipliers or higher interest rates if they hit certain criteria, including banking in their salaries into their account. Actually, many of our customers may not have a salary. So how do we even meet that criteria for us? We said, let's just do away with all
this unnecessary requirements. Why don't we just give people a savings account that allows them to save better by having interest rate debited into account every single day, not at the end of the month, once a month. And that gives money into people's pockets right away. It could be a few cents, but money is still money and that's important to our customers at this point in time when inflation is increasing. If everything is online, people want to know our digital
banks safe. Let's bring in long combing. He's a corporate lawyer at. I don't think piggy banks necessarily pose a greater risk as compared to the ones that are faced by traditional banks. MeS has imposed quite stringent controls and requirements, such as capital requirements on digital banks. For digital banks at two types, there's a digital full bank and the digital wholesale
bank. Under the regime that MES has introduced the digital full bank is the one that is supposed to function as same as a traditional full bank and in order for it to reach that full bank status, it will be in a phased approach whereby at the start there will be limited type of activities that they are able to conduct and then subject to meeting certain milestones, then mes will slowly allow them to take on more business activities take on a large the amount of deficits there also be a cap as
to how much an individual customer can deficit with the bank. So until all these milestones have been met to M. E. S. S satisfaction, then only they will be allowed to fully operate by then their capital requirements. We have been increased to $1.5 billion. So there are steps that MeS has put in to take a more cautious and observatory type of approach towards these digital banks.
And there are also extensive guidelines relating to A. M. L. And K. Y. C. Technology risk outsourcing risks which both traditional and D. G. Banks are subject. The digital banks are also subject to the banking act like traditional banks. So to me the absence of a physical presence, it doesn't really change the business model in terms of how banks operate and how banks make money. So I don't think it necessarily poses a
higher risk as compared to traditional banks. Besides if you look at the candidates that mes have chosen to grant the D. G. Bank licenses to these are big and reputable companies and they are quite well chosen. Tech risk cybersecurity risks are very very important to us as a pure digital bank. That is the number one thing that we are focused on thankfully we've got a board as well that is very very focused on this and they constantly tell us that we need to make
sure that we uphold the highest standards. So right from the store, we build our teams and invested into tech and tech risk, cybersecurity risks and data protection. We've worked very closely as well with mes to create the frameworks that would ensure that our customers and the data, their money's, our systems are just kept safe. We are the first digital bank to get the data protection trust Mark. It was a tall order. It took us a lot of effort to get it done but we felt was very important
to establish trust with our customers. We
had a digital data bank and we have built our digital interfaces at our digital infrastructure on the very latest of technologies and we have built very strong security and controls throughout our bank, but not just building security and controls ourselves. We have also given control of security in the client's hand. So for example using your app will be able to lock or unlock your card or enable or disable specific types
of transactions. And in general have a real safe and secure banking experience with us.
Here's what we've been discussing so far. Digital banks may be a new option for retail customers, but the basics of how they operate are still like traditional banks, like all banks, there are cyber security risks but digital banks are subject to regulatory requirements, just like brick and mortar ones they're targeting. Underserved customers. So they'll be tapping on their ecosystems to build new biz
as well as expand choice for customers. So looking at these business plans, what are some challenges you see ahead
for now? The main challenges that these big banks will face probably will be adoption rate because much as a lot of things have started to go digital, it will take the general public a little bit of time to wrap their heads around not having any physical presence at all for piggy banks because we're not just talking about whether they have a brunch for you to conduct your banking affairs, you won't even have a t m won't have cash machines and everything is online. You
won't have cash basically. I think the adoption rate is going to be probably one of the biggest challenges. You will only be able to use your D. G. Banks payments at merchants who support digital payments. I think it's quite expensive these days. We even see them in hawker centers accepting pay now and taylor and things like that. Right? But the adoption rate can only be fully realized when the whole infrastructure has allowed it. Basically everyone has a
electronic payment options. All the merchants have electronic payment option. We have a report by BCG consulting which says only 5% of the digital banks in the world are profitable. Okay. I know it's early days yet, but do you see a pathway to profitability for these digital banks in Singapore wanted to make sure that we build a sustainable business? Less about the speed
to break even more about the sustainability of it. And the other thing that they are very concerned about is stability of the financial system is our nation's money, our customers money. We've had that in mind right from day one to make sure that we build a sustainable business that would enable us to thrive and to serve our customers well.
At this stage, our real focus is on creating real value for the clients, making it very easy for the clients to sign up with us and giving them a very rewarding experience. We believe that our strong proposition combined with our transparency and our really into IT interface which allow a lot of clients to join us
in a relatively short period of time. We also believe that we have a very sustainable business model and as clients join us and as they build loyal deep relationships over time will be able to grow together.
Looking further a field with Singapore being a crowded market as it is. You must be eyeing the opportunities in the region, Let me zoom out a bit and outline the opportunities in this region, 70% of people across Southeast Asia underbanked
90% that do not have access to credit cards. The opportunity is huge and if you look around the world, this is another region where that emerging middle class, we know that story so well that when they come online, they're going to be looking at what can I buy to upgrade my lifestyle, what kind of banking products allows me to achieve these goals. And we want to be there when the customers are coming online to start to use these products.
by allowing Singapore to stay competitive and relevant because Singapore is a small island nation and having a technological edge over its competitors, it's key. The world will eventually move towards digitalization of the banking sector in this region. I think Singapore is probably one of the first movers for this initiative to have banks
that are fully digital. That's important. That's what Singapore has always been doing, right to have this first mover advantage for many of these industries, banking being one of them other countries in the region
and will eventually move towards that direction too. But by then Singapore probably would have had quite a fair bit of experience in having a fully digital banks these countries, when they try to implement that kind of initiative, they will of course come to look to Singapore for guidance. This trend has always helped Singapore cement its reputation as a financial center.
The reputation is very important to be a frontrunner to be a first mover and that's how Singapore continues to attract the best talent in the world for the sector. I suppose we can say that the future of banking will be digital, but our digital banks the future, the fact that is going fully digital definitely we are going to get used to a world where we don't have physical presence for banks which is probably going to
be the same for many other things. We don't have a physical presence for a lot of merchants and the banking industry. I think it's going to be the same and then and it actually has been moving towards that direction for quite a while now. You know, even the traditional banks, they are very much a part of the entire digital banking ecosystem because they have been modernizing and digitizing over the last decade or so.
I think the business model will work. The brick and mortar model of banking will eventually become a thing of the past. The introduction of D. G. Banks is probably the start that we need to move towards that direction. Yes, if you ask me whether this business model will work, I believe it will, that has to be the case. I think going forward in the future, we've been discussing the five things you need
to know about digital banks. These new options for retail customers in Singapore are offering a digital first choice now, just like traditional banks, they're subject to strict rules on how they operate, including how they keep your data safe. Digital banks are targeting underserved customers in the Singapore market. But with the majority of the population in the region still underbanked, the more lucrative opportunities could lie further a field.
It's still early days though. And around the world, most digital banks haven't yet turned a profit. Looking further ahead. The banking sector is only going to get more and more digital and we could even see a time where all banks are only digital. You've been listening to the Many Mind podcast. My thanks to my guest partner with Ceo of Trust Bank and
Reuben Lai, head of regional office at GsX Bank. Money Mind as every saturday at 10 30 PM on Mediacorp C N A. You can also catch us online at CNN dot asia on Youtube.