WEBVTT - 5 things you need to know about digital banks | EP 19 0:00:05.630 --> 0:00:08.610 digital retail banks have made their debut on the Singapore 0:00:08.610 --> 0:00:12.170 banking scene. What makes them different from traditional banks and 0:00:12.180 --> 0:00:14.700 should you be putting your money in one, I'm sona 0:00:14.700 --> 0:00:16.989 Ramesh from the money mine team with the five things 0:00:16.989 --> 0:00:19.250 you need to know about digital banks 0:00:19.570 --> 0:00:24.460 joining me ceo of trust bank. Now this digital bank 0:00:24.460 --> 0:00:28.110 is backed by Standard chartered and Fair price. We have 0:00:28.110 --> 0:00:31.290 Reuben Lai head of regional office at G excess bank, 0:00:31.300 --> 0:00:34.970 that's the digital bank joint venture between grab and Singtel. 0:00:34.979 --> 0:00:40.069 I'll also be hearing from partner at. So my first 0:00:40.070 --> 0:00:44.479 question is what's the difference between digital banking and a 0:00:44.479 --> 0:00:46.000 digital bank? I mean people 0:00:46.012 --> 0:00:49.952 already using digital options with traditional banks so what does 0:00:49.952 --> 0:00:52.961 a digital bank offer? That's different. There 0:00:52.962 --> 0:00:55.152 are a lot of digital banking services that we in 0:00:55.152 --> 0:00:58.052 Singapore use but what we find is many of these 0:00:58.052 --> 0:01:01.722 services are built on very analog old school brick and 0:01:01.722 --> 0:01:05.122 mortar processes. So while there is a digital wrapper around 0:01:05.122 --> 0:01:08.012 it very often the experience that you get is not 0:01:08.022 --> 0:01:11.122 as seamless, not as real time as what you've come 0:01:11.122 --> 0:01:12.442 to expect from a digital 0:01:12.784 --> 0:01:15.904 bank as a digital native bank. We are looking to 0:01:15.904 --> 0:01:20.063 build very intuitive user interfaces which clients would love to 0:01:20.063 --> 0:01:23.714 interact with and would love to banquet. But secondly also 0:01:23.714 --> 0:01:27.834 equally importantly we are deeply integrated into the NTUC fair 0:01:27.834 --> 0:01:32.374 price ecosystem and this allows us to get opportunity of 0:01:32.384 --> 0:01:35.684 interacting with one million client experiences every day. 0:01:35.694 --> 0:01:38.884 First we believe in the ecosystem approach and for us 0:01:38.896 --> 0:01:42.425 us embedding banking into the everyday life of a customer, 0:01:42.436 --> 0:01:45.386 be taking a grab right ordering, grab food or making 0:01:45.396 --> 0:01:49.036 phone calls or using intel's internet broadband. We want to 0:01:49.046 --> 0:01:52.856 make banking part of the entire experience that also allows 0:01:52.856 --> 0:01:56.466 us then to create products that are very unique. For example, 0:01:56.466 --> 0:02:00.376 if one changes address and change their telco building to 0:02:00.376 --> 0:02:03.306 a different address, we might be able to guess that 0:02:03.306 --> 0:02:05.326 the person has shifted 0:02:05.490 --> 0:02:07.880 and we might make them an offer to say that 0:02:07.890 --> 0:02:11.660 given that you've shifted address, would you like a housing 0:02:11.660 --> 0:02:14.720 loan to renovate your place? And that creates a very 0:02:14.720 --> 0:02:17.490 seamless and beautiful experience for our customers. 0:02:17.690 --> 0:02:22.800 The second digit bank may sound like a robotic bank 0:02:22.810 --> 0:02:26.300 but there's the complete reverse of what we wanted to be. 0:02:26.310 --> 0:02:29.450 In fact we want to bring back service into banking. 0:02:29.460 --> 0:02:34.010 We've got 24 7 customer service hotline that allows our 0:02:34.010 --> 0:02:36.990 customers at any point in time. If you face any issues, 0:02:36.990 --> 0:02:39.730 just call up there will be a friendly customer service 0:02:39.730 --> 0:02:42.109 representative to help our customers. 0:02:42.580 --> 0:02:45.380 If you look at the current banking products in Singapore, 0:02:45.389 --> 0:02:48.970 you have access to many products and services. But what 0:02:48.970 --> 0:02:51.910 you feel is that very often you don't have a 0:02:51.910 --> 0:02:55.470 great experience when you're using them. Take an example of rewards. 0:02:55.500 --> 0:02:59.139 Many banks. All banks are offering many rewards programs and 0:02:59.139 --> 0:03:02.419 these rewards comes with these terms and conditions. But today 0:03:02.419 --> 0:03:04.180 the banks are more or less expecting 0:03:04.200 --> 0:03:07.600 clients to keep track of the terms and conditions. Maybe 0:03:07.600 --> 0:03:09.530 you need to keep it offline. Maybe you need to 0:03:09.530 --> 0:03:11.829 keep a spreadsheet but you need to keep it yourself. 0:03:12.010 --> 0:03:15.340 So how are you innovating? We are giving the entire 0:03:15.340 --> 0:03:18.589 control of the rewards journey in your hand. So in 0:03:18.590 --> 0:03:21.400 your mobile app you can realtor and see where are 0:03:21.400 --> 0:03:23.700 you on your rewards journey. What do you need to 0:03:23.700 --> 0:03:25.800 do in order to maximize your reward? 0:03:25.820 --> 0:03:28.460 We never want you to lose out on your rewards 0:03:28.460 --> 0:03:32.329 ever again. Or for example, you take transparency. We have 0:03:32.330 --> 0:03:35.890 removed every hidden fee from our product and we have 0:03:35.890 --> 0:03:39.730 built transparency as a cornerstone of our proposition and we 0:03:39.730 --> 0:03:42.290 believe that a combination of these two would really help 0:03:42.290 --> 0:03:46.040 us differentiate and possibly create a new space for us 0:03:46.050 --> 0:03:47.440 in this banking market, 0:03:47.940 --> 0:03:51.410 almost every adult in Singapore already has a bank account. 0:03:51.410 --> 0:03:54.040 Do we really need a new type of bank? Singapore 0:03:54.040 --> 0:03:57.130 is well banked, you're right, but well banked does not 0:03:57.130 --> 0:03:59.880 mean well served. I spent a lot of time with 0:03:59.880 --> 0:04:04.960 our customers to grab drivers to grab micro merchants. The retailers, 0:04:04.970 --> 0:04:09.340 small retailers that are trying to build their business and 0:04:09.340 --> 0:04:13.260 looking for access to funds to expand their businesses. Many 0:04:13.260 --> 0:04:15.320 of these folks tell us that 0:04:15.330 --> 0:04:18.720 that the current banking system does not serve them well. 0:04:18.730 --> 0:04:24.080 It doesn't accommodate to their businesses and their needs. Let 0:04:24.080 --> 0:04:27.270 me give you an example. Many bank accounts in Singapore 0:04:27.270 --> 0:04:30.650 may give multipliers or higher interest rates if they hit 0:04:30.650 --> 0:04:37.170 certain criteria, including banking in their salaries into their account. Actually, 0:04:37.170 --> 0:04:40.850 many of our customers may not have a salary. So 0:04:40.850 --> 0:04:42.710 how do we even meet that criteria 0:04:42.720 --> 0:04:45.120 for us? We said, let's just do away with all 0:04:45.120 --> 0:04:50.020 this unnecessary requirements. Why don't we just give people a 0:04:50.020 --> 0:04:53.969 savings account that allows them to save better by having 0:04:53.980 --> 0:04:57.530 interest rate debited into account every single day, not at 0:04:57.529 --> 0:05:00.089 the end of the month, once a month. And that 0:05:00.089 --> 0:05:02.840 gives money into people's pockets right away. It could be 0:05:02.839 --> 0:05:05.739 a few cents, but money is still money and that's 0:05:05.740 --> 0:05:08.260 important to our customers at this point in time when 0:05:08.260 --> 0:05:10.110 inflation is increasing. 0:05:10.320 --> 0:05:13.660 If everything is online, people want to know our digital 0:05:13.660 --> 0:05:17.020 banks safe. Let's bring in long combing. He's a corporate 0:05:17.020 --> 0:05:22.050 lawyer at. I don't think piggy banks necessarily pose a 0:05:22.050 --> 0:05:25.560 greater risk as compared to the ones that are faced 0:05:25.560 --> 0:05:31.589 by traditional banks. MeS has imposed quite stringent controls and requirements, 0:05:31.589 --> 0:05:35.610 such as capital requirements on digital banks. For digital banks 0:05:35.610 --> 0:05:38.260 at two types, there's a digital full bank and the 0:05:38.260 --> 0:05:39.330 digital wholesale 0:05:39.346 --> 0:05:42.575 bank. Under the regime that MES has introduced the digital 0:05:42.576 --> 0:05:45.926 full bank is the one that is supposed to function 0:05:45.936 --> 0:05:49.406 as same as a traditional full bank and in order 0:05:49.406 --> 0:05:52.746 for it to reach that full bank status, it will 0:05:52.755 --> 0:05:55.986 be in a phased approach whereby at the start there 0:05:55.986 --> 0:05:59.626 will be limited type of activities that they are able 0:05:59.626 --> 0:06:03.576 to conduct and then subject to meeting certain milestones, then 0:06:03.586 --> 0:06:06.645 mes will slowly allow them to take on more business 0:06:06.646 --> 0:06:08.356 activities take on a large 0:06:08.372 --> 0:06:11.302 the amount of deficits there also be a cap as 0:06:11.302 --> 0:06:15.522 to how much an individual customer can deficit with the bank. 0:06:15.532 --> 0:06:19.082 So until all these milestones have been met to M. E. S. 0:06:19.082 --> 0:06:23.092 S satisfaction, then only they will be allowed to fully 0:06:23.092 --> 0:06:26.921 operate by then their capital requirements. We have been increased 0:06:26.922 --> 0:06:30.851 to $1.5 billion. So there are steps that MeS has 0:06:30.851 --> 0:06:34.582 put in to take a more cautious and observatory type 0:06:34.582 --> 0:06:37.400 of approach towards these digital banks. 0:06:37.660 --> 0:06:41.270 And there are also extensive guidelines relating to A. M. L. 0:06:41.270 --> 0:06:45.750 And K. Y. C. Technology risk outsourcing risks which both 0:06:45.750 --> 0:06:49.419 traditional and D. G. Banks are subject. The digital banks 0:06:49.420 --> 0:06:53.120 are also subject to the banking act like traditional banks. 0:06:53.130 --> 0:06:56.989 So to me the absence of a physical presence, it 0:06:56.990 --> 0:06:58.800 doesn't really change the business 0:06:58.815 --> 0:07:02.005 model in terms of how banks operate and how banks 0:07:02.015 --> 0:07:05.734 make money. So I don't think it necessarily poses a 0:07:05.745 --> 0:07:09.705 higher risk as compared to traditional banks. Besides if you 0:07:09.705 --> 0:07:13.975 look at the candidates that mes have chosen to grant 0:07:13.975 --> 0:07:17.155 the D. G. Bank licenses to these are big and 0:07:17.155 --> 0:07:19.965 reputable companies and they are quite well chosen. 0:07:20.760 --> 0:07:25.930 Tech risk cybersecurity risks are very very important to us 0:07:25.940 --> 0:07:29.180 as a pure digital bank. That is the number one 0:07:29.180 --> 0:07:31.960 thing that we are focused on thankfully we've got a 0:07:31.960 --> 0:07:34.740 board as well that is very very focused on this 0:07:34.740 --> 0:07:37.190 and they constantly tell us that we need to make 0:07:37.190 --> 0:07:40.660 sure that we uphold the highest standards. So right from 0:07:40.660 --> 0:07:40.910 the store, 0:07:40.923 --> 0:07:45.353 we build our teams and invested into tech and tech risk, 0:07:45.363 --> 0:07:49.793 cybersecurity risks and data protection. We've worked very closely as 0:07:49.793 --> 0:07:54.353 well with mes to create the frameworks that would ensure 0:07:54.363 --> 0:07:58.613 that our customers and the data, their money's, our systems 0:07:58.623 --> 0:08:01.070 are just kept safe. We are the first digital 0:08:01.086 --> 0:08:03.806 bank to get the data protection trust Mark. It was 0:08:03.806 --> 0:08:05.946 a tall order. It took us a lot of effort 0:08:05.946 --> 0:08:08.826 to get it done but we felt was very important 0:08:08.826 --> 0:08:11.676 to establish trust with our customers. We 0:08:11.676 --> 0:08:15.846 had a digital data bank and we have built our 0:08:15.856 --> 0:08:20.196 digital interfaces at our digital infrastructure on the very latest 0:08:20.196 --> 0:08:24.476 of technologies and we have built very strong security and 0:08:24.476 --> 0:08:26.586 controls throughout our bank, 0:08:26.930 --> 0:08:30.400 but not just building security and controls ourselves. We have 0:08:30.410 --> 0:08:33.630 also given control of security in the client's hand. So 0:08:33.630 --> 0:08:36.060 for example using your app will be able to lock 0:08:36.059 --> 0:08:39.220 or unlock your card or enable or disable specific types 0:08:39.220 --> 0:08:42.530 of transactions. And in general have a real safe and 0:08:42.530 --> 0:08:44.720 secure banking experience with us. 0:08:45.140 --> 0:08:48.280 Here's what we've been discussing so far. Digital banks may 0:08:48.280 --> 0:08:51.640 be a new option for retail customers, but the basics 0:08:51.640 --> 0:08:55.050 of how they operate are still like traditional banks, like 0:08:55.050 --> 0:08:58.859 all banks, there are cyber security risks but digital banks 0:08:58.860 --> 0:09:01.949 are subject to regulatory requirements, just like brick and mortar 0:09:01.950 --> 0:09:06.330 ones they're targeting. Underserved customers. So they'll be tapping on 0:09:06.330 --> 0:09:08.210 their ecosystems to build new biz 0:09:08.460 --> 0:09:12.040 as well as expand choice for customers. So looking at 0:09:12.040 --> 0:09:15.210 these business plans, what are some challenges you see ahead 0:09:15.220 --> 0:09:19.160 for now? The main challenges that these big banks will 0:09:19.160 --> 0:09:22.840 face probably will be adoption rate because much as a 0:09:22.840 --> 0:09:25.390 lot of things have started to go digital, it will 0:09:25.390 --> 0:09:28.309 take the general public a little bit of time to 0:09:28.309 --> 0:09:31.300 wrap their heads around not having any physical 0:09:31.320 --> 0:09:34.610 presence at all for piggy banks because we're not just 0:09:34.610 --> 0:09:37.510 talking about whether they have a brunch for you to 0:09:37.510 --> 0:09:40.370 conduct your banking affairs, you won't even have a t 0:09:40.370 --> 0:09:44.459 m won't have cash machines and everything is online. You 0:09:44.460 --> 0:09:47.550 won't have cash basically. I think the adoption rate is 0:09:47.550 --> 0:09:50.859 going to be probably one of the biggest challenges. You 0:09:50.860 --> 0:09:53.360 will only be able to use your D. G. Banks 0:09:53.360 --> 0:09:54.390 payments 0:09:54.410 --> 0:09:58.690 at merchants who support digital payments. I think it's quite 0:09:58.700 --> 0:10:01.939 expensive these days. We even see them in hawker centers 0:10:01.950 --> 0:10:04.520 accepting pay now and taylor and things like that. Right? 0:10:04.530 --> 0:10:08.050 But the adoption rate can only be fully realized when 0:10:08.059 --> 0:10:13.339 the whole infrastructure has allowed it. Basically everyone has a 0:10:13.350 --> 0:10:17.500 electronic payment options. All the merchants have electronic payment option. 0:10:17.710 --> 0:10:22.510 We have a report by BCG consulting which says only 5% 0:10:22.520 --> 0:10:25.459 of the digital banks in the world are profitable. Okay. 0:10:25.460 --> 0:10:27.690 I know it's early days yet, but do you see 0:10:27.690 --> 0:10:31.689 a pathway to profitability for these digital banks in Singapore 0:10:32.090 --> 0:10:35.010 wanted to make sure that we build a sustainable business? 0:10:35.020 --> 0:10:36.280 Less about the speed 0:10:36.345 --> 0:10:39.405 to break even more about the sustainability of it. And 0:10:39.405 --> 0:10:42.054 the other thing that they are very concerned about is 0:10:42.065 --> 0:10:45.705 stability of the financial system is our nation's money, our 0:10:45.705 --> 0:10:48.665 customers money. We've had that in mind right from day 0:10:48.665 --> 0:10:51.345 one to make sure that we build a sustainable business 0:10:51.355 --> 0:10:53.965 that would enable us to thrive and to serve our 0:10:53.965 --> 0:10:54.975 customers well. 0:10:55.350 --> 0:10:58.760 At this stage, our real focus is on creating real 0:10:58.760 --> 0:11:01.680 value for the clients, making it very easy for the 0:11:01.679 --> 0:11:04.000 clients to sign up with us and giving them a 0:11:04.000 --> 0:11:08.630 very rewarding experience. We believe that our strong proposition combined 0:11:08.630 --> 0:11:11.359 with our transparency and our really into IT 0:11:11.735 --> 0:11:14.905 interface which allow a lot of clients to join us 0:11:14.915 --> 0:11:17.485 in a relatively short period of time. We also believe 0:11:17.495 --> 0:11:21.235 that we have a very sustainable business model and as 0:11:21.235 --> 0:11:24.775 clients join us and as they build loyal deep relationships 0:11:24.775 --> 0:11:27.365 over time will be able to grow together. 0:11:27.684 --> 0:11:30.755 Looking further a field with Singapore being a crowded market 0:11:30.755 --> 0:11:33.315 as it is. You must be eyeing the opportunities in 0:11:33.315 --> 0:11:33.975 the region, 0:11:34.600 --> 0:11:37.270 Let me zoom out a bit and outline the opportunities 0:11:37.270 --> 0:11:41.740 in this region, 70% of people across Southeast Asia underbanked 0:11:42.280 --> 0:11:45.449 90% that do not have access to credit cards. The 0:11:45.460 --> 0:11:48.510 opportunity is huge and if you look around the world, 0:11:48.520 --> 0:11:52.340 this is another region where that emerging middle class, we 0:11:52.340 --> 0:11:55.790 know that story so well that when they come online, 0:11:55.800 --> 0:11:58.220 they're going to be looking at what can I buy 0:11:58.220 --> 0:12:01.640 to upgrade my lifestyle, what kind of banking products allows 0:12:01.640 --> 0:12:04.699 me to achieve these goals. And we want to be 0:12:04.700 --> 0:12:08.670 there when the customers are coming online to start to 0:12:08.670 --> 0:12:10.090 use these products. 0:12:10.770 --> 0:12:14.969 by allowing Singapore to stay competitive and relevant because Singapore 0:12:14.970 --> 0:12:19.109 is a small island nation and having a technological edge 0:12:19.110 --> 0:12:21.270 over its competitors, it's key. 0:12:21.550 --> 0:12:25.329 The world will eventually move towards digitalization of the banking 0:12:25.330 --> 0:12:28.940 sector in this region. I think Singapore is probably one 0:12:28.940 --> 0:12:32.000 of the first movers for this initiative to have banks 0:12:32.000 --> 0:12:35.400 that are fully digital. That's important. That's what Singapore has 0:12:35.400 --> 0:12:39.230 always been doing, right to have this first mover advantage 0:12:39.240 --> 0:12:43.110 for many of these industries, banking being one of them 0:12:43.120 --> 0:12:44.380 other countries in the region 0:12:44.405 --> 0:12:47.965 and will eventually move towards that direction too. But by 0:12:47.965 --> 0:12:50.675 then Singapore probably would have had quite a fair bit 0:12:50.675 --> 0:12:55.175 of experience in having a fully digital banks these countries, 0:12:55.175 --> 0:12:58.694 when they try to implement that kind of initiative, they 0:12:58.695 --> 0:13:01.295 will of course come to look to Singapore for guidance. 0:13:01.304 --> 0:13:05.675 This trend has always helped Singapore cement its reputation as 0:13:05.684 --> 0:13:07.260 a financial center. 0:13:07.429 --> 0:13:10.370 The reputation is very important to be a frontrunner to 0:13:10.380 --> 0:13:14.140 be a first mover and that's how Singapore continues to 0:13:14.140 --> 0:13:16.600 attract the best talent in the world for the sector. 0:13:16.610 --> 0:13:19.150 I suppose we can say that the future of banking 0:13:19.150 --> 0:13:22.670 will be digital, but our digital banks the future, 0:13:23.160 --> 0:13:27.400 the fact that is going fully digital definitely we are 0:13:27.400 --> 0:13:30.010 going to get used to a world where we don't 0:13:30.010 --> 0:13:33.760 have physical presence for banks which is probably going to 0:13:33.760 --> 0:13:36.360 be the same for many other things. We don't have 0:13:36.360 --> 0:13:40.520 a physical presence for a lot of merchants and the 0:13:40.520 --> 0:13:41.569 banking industry. I think 0:13:41.580 --> 0:13:43.330 it's going to be the same and then and it 0:13:43.330 --> 0:13:46.510 actually has been moving towards that direction for quite a 0:13:46.510 --> 0:13:49.450 while now. You know, even the traditional banks, they are 0:13:49.460 --> 0:13:53.820 very much a part of the entire digital banking ecosystem 0:13:53.820 --> 0:13:58.860 because they have been modernizing and digitizing over the last 0:13:58.860 --> 0:14:00.000 decade or so. 0:14:01.309 --> 0:14:04.880 I think the business model will work. The brick and 0:14:04.880 --> 0:14:09.400 mortar model of banking will eventually become a thing of 0:14:09.400 --> 0:14:12.050 the past. The introduction of D. G. Banks is probably 0:14:12.050 --> 0:14:16.100 the start that we need to move towards that direction. Yes, 0:14:16.110 --> 0:14:18.290 if you ask me whether this business model will work, 0:14:18.300 --> 0:14:19.490 I believe it will, that 0:14:19.505 --> 0:14:21.325 has to be the case. I think going forward in 0:14:21.325 --> 0:14:23.965 the future, we've been discussing the five things you need 0:14:23.965 --> 0:14:27.295 to know about digital banks. These new options for retail 0:14:27.295 --> 0:14:31.305 customers in Singapore are offering a digital first choice now, 0:14:31.305 --> 0:14:34.475 just like traditional banks, they're subject to strict rules on 0:14:34.475 --> 0:14:37.685 how they operate, including how they keep your data safe. 0:14:37.950 --> 0:14:42.280 Digital banks are targeting underserved customers in the Singapore market. 0:14:42.290 --> 0:14:44.859 But with the majority of the population in the region 0:14:44.870 --> 0:14:49.960 still underbanked, the more lucrative opportunities could lie further a field. 0:14:49.970 --> 0:14:52.870 It's still early days though. And around the world, most 0:14:52.870 --> 0:14:57.510 digital banks haven't yet turned a profit. Looking further ahead. 0:14:57.520 --> 0:15:00.090 The banking sector is only going to get more and 0:15:00.090 --> 0:15:02.470 more digital and we could even see a time where 0:15:02.480 --> 0:15:04.830 all banks are only digital. 0:15:05.010 --> 0:15:07.910 You've been listening to the Many Mind podcast. My thanks 0:15:07.910 --> 0:15:14.109 to my guest partner with Ceo of Trust Bank and 0:15:14.110 --> 0:15:18.080 Reuben Lai, head of regional office at GsX Bank. Money 0:15:18.080 --> 0:15:21.350 Mind as every saturday at 10 30 PM on Mediacorp 0:15:21.350 --> 0:15:23.930 C N A. You can also catch us online at 0:15:23.930 --> 0:15:26.190 CNN dot asia on Youtube.