WEBVTT - Should you sign up with a digital bank that has no physical branches? | EP 13

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<v Speaker 1>This is a C N. A podcast.

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<v Speaker 2>Could you give us your thoughts on the following physical banks?

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<v Speaker 2>To stay bank customer service have to step up digital banks?

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<v Speaker 2>Digital bank security

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<v Speaker 2>should be quite okay cash.

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<v Speaker 2>Thanks

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<v Speaker 2>thanks for joining us on money talks. I'm Sarah Khaldi

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<v Speaker 2>for as long as most of us have been alive.

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<v Speaker 2>A bank is a place where you can go to

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<v Speaker 2>with Tillerson uniform and managers who processed account openings. Now

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<v Speaker 2>we're on the cusp of a bank which

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<v Speaker 2>operates entirely on your mobile phone. They're called digital banks

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<v Speaker 2>and in Singapore, two of them have launched G X.

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<v Speaker 2>S is developed by grab and Singtel and trust bank

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<v Speaker 2>is a tie up with standard Chartered Bank and NtuC

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<v Speaker 2>Fair Price Group.

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<v Speaker 2>The aim is to work like a bank but be

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<v Speaker 2>fully powered by technology. All of it sounds exciting. But

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<v Speaker 2>can you trust a digital bank with your hard earned money?

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<v Speaker 2>What can they do that traditional banks can't, should you

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<v Speaker 2>sign up for one and move funds there to talk

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<v Speaker 2>all about this? I'm with Ho jin Chen, who leads

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<v Speaker 2>PWC's financial services assurance practice

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<v Speaker 2>pinch in. Thanks so much for joining us today. Thank

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<v Speaker 2>you for having me Sarah. There's so much buzz around

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<v Speaker 2>digital banks but there is mixed reactions are excited and

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<v Speaker 2>people are curious then there are those who are quite

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<v Speaker 2>skeptical about the whole thing. When was the

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<v Speaker 2>last time you actually went to a physical bank branch

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<v Speaker 2>for me. There must be at least six months ago.

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<v Speaker 2>That's not bad for me. It was like years. I

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<v Speaker 2>can't remember why I actually went to the bank and

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<v Speaker 2>so after my experience

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<v Speaker 2>I might not step into a physical bank branch for

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<v Speaker 2>a while. Do you have to queue for a long time?

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<v Speaker 2>Two hours? No way it is true. Two hours. And

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<v Speaker 2>I thought that the request I had was quite a

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<v Speaker 2>simple one is just to change some standing instructions for

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<v Speaker 2>the srs supplementary retirement scheme. Yeah so it was a mistake.

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<v Speaker 2>So I went in

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<v Speaker 2>like you for a while, there were lots of paperwork

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<v Speaker 2>so eventually it's only after two hours and I stepped

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<v Speaker 2>out of the bank and I guess that's why we

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<v Speaker 2>have all these digital banks now. We know that these

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<v Speaker 2>digital banks would not have physical branches unlike traditional banks.

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<v Speaker 2>But what are some of the other main differences between

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<v Speaker 2>the two? So digital banks are quite similar to a

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<v Speaker 2>tree

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<v Speaker 2>National Bank. They provide banking services like loans, deposits, credit cards.

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<v Speaker 2>The only difference is that for digital banks, they do

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<v Speaker 2>all their transactions online through apps, through the website, through

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<v Speaker 2>mobile phones. They don't have physical infrastructure. You won't see

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<v Speaker 2>a bank branch or a T. M's traditional bank. You

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<v Speaker 2>have get so it's a fiscal banking for traditional banks

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<v Speaker 2>at the same time system introduced now it's called digital banking.

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<v Speaker 2>So people tend to

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<v Speaker 2>confuse that and use it interchangeably with digital banks but

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<v Speaker 2>actually are not. Digital banks are virtual banks is a

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<v Speaker 2>bank where doing all their transactions online, where digital banking

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<v Speaker 2>is the act of banking. So, traditional banks, although they

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<v Speaker 2>are fiscal as well, they also have digital banking through

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<v Speaker 2>their apps through their website. There's a little difference on it,

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<v Speaker 2>but if let's say I have a bank account with

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<v Speaker 2>a traditional bank, but I do all my transactions online.

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<v Speaker 2>How different is a traditional bank with a lot of

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<v Speaker 2>digital services prepared to digital banks. So in the recent

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<v Speaker 2>PWC surveyed in Singapore, the statistics shows that seven of

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<v Speaker 2>10 people have some issues with their traditional banks. Right,

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<v Speaker 2>Billy is online or is it physical? And because of

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<v Speaker 2>this there are some pinpoints. So I just showed you

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<v Speaker 2>earlier in terms of my

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<v Speaker 2>experience in the fiscal branch. So can it be done

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<v Speaker 2>online probably. But at the same time it is about

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<v Speaker 2>the education where people may not be so familiar with

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<v Speaker 2>this whole digital banking. So there is still a point

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<v Speaker 2>about people being comfortable. I could be doing all my

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<v Speaker 2>banking services through digital means on traditional banks.

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<v Speaker 2>But at this point in time, the digital banks in Singapore,

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<v Speaker 2>they're still very, very much restricted. So they can only

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<v Speaker 2>offer very simple products like the credit cards, very simple insurance.

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<v Speaker 2>But there's still a lot of things that we have

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<v Speaker 2>to do through the digital banking in the fiscal banks.

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<v Speaker 2>So it means we still need our traditional banks to

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<v Speaker 2>do many other transactions that some of these digital banks

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<v Speaker 2>are

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<v Speaker 2>still not allowed to offer. Absolutely. The current digital banks

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<v Speaker 2>has been launched. It is very limited. What's the point

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<v Speaker 2>then of having digital banks Right. The digital adoption within

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<v Speaker 2>Singapore is very high highest amongst the asian countries, 88%.

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<v Speaker 2>But if you look at it within this population okay.

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<v Speaker 2>We did a survey. So for the population 15 years

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<v Speaker 2>and above only 60% 606 out of 10

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<v Speaker 2>are considered properly bank. By the traditional banks, properly bank

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<v Speaker 2>means that they have access to bank accounts and they

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<v Speaker 2>are also have access to the more sophisticated products. For example,

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<v Speaker 2>Democratic cars, the deposit structure notes and of this population, 38%

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<v Speaker 2>are considered what they call under bank. That means they

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<v Speaker 2>have access to limited bank accounts, access to limited products

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<v Speaker 2>they're under bank

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<v Speaker 2>And the remaining 2% our call the bank means there's

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<v Speaker 2>absolutely no access to bank accounts in that respect. You

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<v Speaker 2>can see that while we are very digitally entrenched there

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<v Speaker 2>is still a proportion of the population that can be

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<v Speaker 2>bank that can be reached out through digital means we

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<v Speaker 2>have to defend Singapore's position as the leading financial center

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<v Speaker 2>in Asia.

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<v Speaker 2>And then with the evolution of the e commerce people

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<v Speaker 2>are getting more digitally savvy. There's a need for them

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<v Speaker 2>to introduce this right to keep up with the paces

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<v Speaker 2>of the U. K. The U. S. And the Hong

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<v Speaker 2>kong's digital banking is getting more and more important and

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<v Speaker 2>there's a part that digital banks can play especially if

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<v Speaker 2>they can focus on what we call the underserved segments.

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<v Speaker 2>Is that underserved segment more? The young people? What's the

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<v Speaker 2>demographic who are these people that

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<v Speaker 2>are not really completely banked? So if you look at

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<v Speaker 2>it these underserved segments and depending on the strategy of

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<v Speaker 2>digital banks, the one that I'm aware of is that

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<v Speaker 2>they're looking at the young families. The cost of inflation

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<v Speaker 2>has been going up quite rapidly. Our savings are being

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<v Speaker 2>eroded because of the savings rates. They are looking at

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<v Speaker 2>assignment of that. They're also a segment of the young

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<v Speaker 2>the millenniums

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<v Speaker 2>by those who are starting work. They may not have

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<v Speaker 2>the capabilities or they may not match the thresholds of

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<v Speaker 2>traditional banks. For example where you need to maintain a

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<v Speaker 2>minimum some in your deposits or for example you might

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<v Speaker 2>need to make certain number of transactions on a monthly basis.

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<v Speaker 2>There are some who will impose annual fees on your

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<v Speaker 2>credit cards. There are some of these and also the

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<v Speaker 2>economy workers right where they may not have access to

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<v Speaker 2>already access maybe because of the profile of their financial positions.

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<v Speaker 2>If you go through the credit scoring system of traditional banks,

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<v Speaker 2>they may not be eligible for a loan or credit card.

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<v Speaker 2>I rest for the digital banks because of the innovation

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<v Speaker 2>that they used to use a lot of artificial intelligence.

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<v Speaker 2>A lot of data crunching, they may be able to

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<v Speaker 2>accept that, okay, while you may not meet certain criteria,

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<v Speaker 2>but I can take the risk. I can still offer

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<v Speaker 2>you a certain type of credit lower level. But at

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<v Speaker 2>least I'm trying to bank you,

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<v Speaker 2>Especially the millennials, right? And we're just starting off of

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<v Speaker 2>work or my young daughter who is 16 years old

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<v Speaker 2>now have absolutely no credit cards but increasingly when she's

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<v Speaker 2>getting out to buy her things using all the pain now.

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<v Speaker 2>But is this a population that the banks may start

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<v Speaker 2>looking into that? I see. So it's more targeting these

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<v Speaker 2>people who may fall through the cracks through the cracks.

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<v Speaker 2>Hi, my name is steve lie and I'm Teresa tang

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<v Speaker 2>and we are the hosts of the new podcast CNN

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<v Speaker 2>correspondent from new york to Bangkok join us as we

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<v Speaker 2>kick back and chat with our colleagues across the globe

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<v Speaker 2>about the latest news developments. Look out for our weekly

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<v Speaker 2>episodes wherever you get your podcasts.

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<v Speaker 2>One bank that is out right now is g excess

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<v Speaker 2>which is between grab and Singtel but it's only available

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<v Speaker 2>to a select group right? The one that you mentioned,

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<v Speaker 2>the bank only eligible to open an account on invitation

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<v Speaker 2>and they're opening up within the ecosystems. It means the

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<v Speaker 2>grab drivers and delivery riders and if you have an

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<v Speaker 2>account with the telephone and also the employees within that corporations,

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<v Speaker 2>I tried to download the app to open the account

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<v Speaker 2>but it's only by invitation when they allow me to

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<v Speaker 2>open the account definitely the other bank that has launched

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<v Speaker 2>is Trust Bank. Well it's showing 1.4% per annum. But

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<v Speaker 2>really the draw seems to be, you know grocery savings

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<v Speaker 2>link points with Ntuc loyalty program.

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<v Speaker 2>But there are other credit cards that could give you

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<v Speaker 2>grocery cash back as well. So what do you think

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<v Speaker 2>about their strategy and how they're trying to attract customers?

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<v Speaker 2>It is very common for any new entrance to markets

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<v Speaker 2>to offer very enticing sign up rewards. It's ready to

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<v Speaker 2>gain the very strong foothold into the markets.

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<v Speaker 2>The question is whether or not these are sustainable. Right?

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<v Speaker 2>So if I can just reflect back to our right

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<v Speaker 2>healing experience five years ago with all the vouchers and

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<v Speaker 2>all the vouchers. Our rights are heavily subsidized. You don't

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<v Speaker 2>pay more than a couple of dollars to go to

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<v Speaker 2>point to point B. It's a matter of them who

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<v Speaker 2>has more money to burn for us. The consumers is

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<v Speaker 2>honeymoon period and we

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<v Speaker 2>enjoy it. We loved it. But you look at the

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<v Speaker 2>current status now, where are we on that? The question

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<v Speaker 2>therefore for them is that how are they going to

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<v Speaker 2>use the advantage? So for digital banks, they have no

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<v Speaker 2>physical infrastructure so they are fixed cost is much lower.

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<v Speaker 2>Are they therefore able to translate these savings into better

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<v Speaker 2>perks for the consumers

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<v Speaker 2>Higher rebates, high interest rates. And how long can you

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<v Speaker 2>do that? The bank that you mentioned? I also downloaded that. Yes,

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<v Speaker 2>it's giving you high interest rates but it's only for

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<v Speaker 2>a period of time. But it sounds like if you

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<v Speaker 2>can access many services from the traditional banks then there's

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<v Speaker 2>no real need to go to a digital bank. Is

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<v Speaker 2>that right? As I mentioned, the survey showed that seven

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<v Speaker 2>out of 10 people,

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<v Speaker 2>They are not happy. Seven out of 10. They have

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<v Speaker 2>some issues with the traditional banks. Is the customer experience?

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<v Speaker 2>That may not be that good yet. Is that the

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<v Speaker 2>battle then customer experience? Yes, definitely. The customer experience is

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<v Speaker 2>going to be the battle.

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<v Speaker 2>How long do you need to open an account? Just

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<v Speaker 2>a couple of days ago, me and my wife were

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<v Speaker 2>having coffee in our coffee shops.

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<v Speaker 2>So then she received a text from a friend. Is

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<v Speaker 2>a referral court. Yeah, I received. Yeah, she was pretty

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<v Speaker 2>excited about it. Yeah. And then she on the spot

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<v Speaker 2>for having a coffee. She applied for the cut within minutes.

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<v Speaker 2>She got the cut. Really? Yes. The way of applying

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<v Speaker 2>cuts

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<v Speaker 2>has evolved. But there's still some legacies in there. Do

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<v Speaker 2>you still need to submit your monthly salary statements?

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<v Speaker 2>Can you do it through the centralized mind force system?

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<v Speaker 2>So the customer experience is the very critical ones are

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<v Speaker 2>deposits in these digital banks protected and insured because right now,

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<v Speaker 2>deposits in your traditional bank are insured up to $75,000.

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<v Speaker 2>Is that right?

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<v Speaker 2>That means if the bank goes under, for whatever reason,

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<v Speaker 2>you still get $75,000 of your deposit. Yeah, but with

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<v Speaker 2>these digital banks, is that the same? Yes, it is.

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<v Speaker 2>So all these banks are under the regime of the S. D. I. C.

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<v Speaker 2>Singapore deposit insurance scheme

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<v Speaker 2>for all banks issued license by the M. A. S.

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<v Speaker 2>You're on the scheme. So you're right, even your digital

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<v Speaker 2>banks are insured up to 75,000. If it goes belly up,

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<v Speaker 2>your deposits are protected up to 25,000. But there are

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<v Speaker 2>obviously some limitations to that if you are losing your

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<v Speaker 2>money because you have been scammed for example,

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<v Speaker 2>so, those are not being protected. That's another issue though

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<v Speaker 2>with digital banks because these are new entities and they're

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<v Speaker 2>fully online. How safe is it from security breaches and

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<v Speaker 2>these online scams? I think there are two dimensions to that.

0:13:51.870 --> 0:13:53.720
<v Speaker 2>The first one is my money safe.

0:13:53.980 --> 0:13:56.750
<v Speaker 2>The other one is my data safe. Right? So, in

0:13:56.750 --> 0:14:00.380
<v Speaker 2>terms of the money safe, as we discussed earlier, up

0:14:00.380 --> 0:14:04.620
<v Speaker 2>to $75,000 of the deposits are being insured at this

0:14:04.620 --> 0:14:06.520
<v Speaker 2>point in time, the digital banks, they are not at

0:14:06.520 --> 0:14:09.300
<v Speaker 2>that level yet. So that should be quite all right.

0:14:09.309 --> 0:14:13.800
<v Speaker 2>The other one is when mes issued the licenses to

0:14:13.800 --> 0:14:16.670
<v Speaker 2>digital banks as part of the assessment, they will make

0:14:16.670 --> 0:14:21.590
<v Speaker 2>sure that the licenses have got very strong financial backing

0:14:21.600 --> 0:14:23.280
<v Speaker 2>that they have a very good

0:14:23.630 --> 0:14:27.350
<v Speaker 2>business proposal, value proposition and they've got a very good

0:14:27.360 --> 0:14:30.670
<v Speaker 2>track record And more importantly as part of the issuance

0:14:30.670 --> 0:14:34.120
<v Speaker 2>of license M. S. Of impose a minimum capital requirement.

0:14:34.130 --> 0:14:36.870
<v Speaker 2>The question then is is my data safe? You have

0:14:36.870 --> 0:14:40.240
<v Speaker 2>to adhere to a lot of banking regulations as part

0:14:40.240 --> 0:14:43.790
<v Speaker 2>of this things like the technology risk management,

0:14:44.100 --> 0:14:49.580
<v Speaker 2>your cyber resilience, outsourcing, data protection recoveries. All these are

0:14:49.580 --> 0:14:53.360
<v Speaker 2>all encompassed within the regulations. So for a bank to

0:14:53.360 --> 0:14:56.390
<v Speaker 2>be launched, you must make sure that you comply with regulations.

0:14:56.400 --> 0:15:00.820
<v Speaker 2>You mentioned earlier about how customer service is the main

0:15:00.820 --> 0:15:04.800
<v Speaker 2>draw of these digital banks but how seamless do you

0:15:04.800 --> 0:15:09.310
<v Speaker 2>think these transactions will be if there's no physical bank

0:15:09.320 --> 0:15:13.020
<v Speaker 2>branch and there's no physical tellers. Especially those transact.

0:15:13.035 --> 0:15:18.745
<v Speaker 2>They're a bit more complicated and complex like insurance and

0:15:18.745 --> 0:15:22.135
<v Speaker 2>credit cards. Let's face it by and large humans are

0:15:22.135 --> 0:15:26.865
<v Speaker 2>still social beings. We like familiar things so face to

0:15:26.865 --> 0:15:32.725
<v Speaker 2>face interaction is still very important. Another joke, my daughter

0:15:32.735 --> 0:15:35.595
<v Speaker 2>was having a gathering with your friends. They have not

0:15:35.595 --> 0:15:38.335
<v Speaker 2>met for one or two years when they are sitting

0:15:38.335 --> 0:15:39.495
<v Speaker 2>at the cafeteria

0:15:39.870 --> 0:15:42.850
<v Speaker 2>across each other on the table. They were all not talking,

0:15:42.860 --> 0:15:46.240
<v Speaker 2>they're all looking at their phones. Right? So so you're

0:15:46.240 --> 0:15:49.550
<v Speaker 2>quite curious and say you are together, Why aren't you

0:15:49.560 --> 0:15:50.670
<v Speaker 2>interacting

0:15:51.210 --> 0:15:53.830
<v Speaker 2>then she looked at me, we're talking about, we're interacting,

0:15:53.840 --> 0:15:59.110
<v Speaker 2>we're doing the WhatsApp. They're chatting among themselves in the

0:15:59.110 --> 0:16:01.560
<v Speaker 2>WhatsApp group? Although they are facing one another.

0:16:02.080 --> 0:16:04.090
<v Speaker 2>To your point. A lot of us are familiar. We

0:16:04.090 --> 0:16:06.670
<v Speaker 2>want the social interactions but we never know the evolution

0:16:06.670 --> 0:16:09.420
<v Speaker 2>of time whether or not you become a bit different.

0:16:09.430 --> 0:16:12.850
<v Speaker 2>So for those who wants a face to face interaction,

0:16:12.860 --> 0:16:17.280
<v Speaker 2>the traditional bank still allows that through your fiscal ones.

0:16:17.290 --> 0:16:20.850
<v Speaker 2>And it's very important during times of stress where it's

0:16:20.850 --> 0:16:24.670
<v Speaker 2>very complicated products you need to talk to somebody. The

0:16:24.670 --> 0:16:28.980
<v Speaker 2>challenge then for the digital banks is whether or not

0:16:28.990 --> 0:16:30.220
<v Speaker 2>you can simplify

0:16:30.480 --> 0:16:34.060
<v Speaker 2>your products right? And making it very easy for people

0:16:34.060 --> 0:16:38.590
<v Speaker 2>to assess it to understand it. So if I were

0:16:38.590 --> 0:16:42.380
<v Speaker 2>to receive different referral codes, what would you tell me

0:16:42.390 --> 0:16:45.619
<v Speaker 2>about whether I should sign up for a digital bank.

0:16:45.630 --> 0:16:50.000
<v Speaker 2>If I already have a traditional bank that I go to,

0:16:50.010 --> 0:16:54.000
<v Speaker 2>nothing is stopping us from signing up for digital bank.

0:16:54.010 --> 0:16:55.870
<v Speaker 2>It's not just the digital banks.

0:16:56.300 --> 0:17:00.870
<v Speaker 2>There are so many apps at the health apps, the

0:17:00.880 --> 0:17:03.930
<v Speaker 2>payment payment apps, e commerce app. We have received a

0:17:03.930 --> 0:17:06.959
<v Speaker 2>lot of referral codes and we have signed up a

0:17:06.960 --> 0:17:10.850
<v Speaker 2>lot of it and after we use the voucher, let's

0:17:10.850 --> 0:17:12.929
<v Speaker 2>be honest, how many times have you gone back to

0:17:12.930 --> 0:17:13.340
<v Speaker 2>the app?

0:17:13.580 --> 0:17:18.300
<v Speaker 2>So it's going to be an overwhelming loss of SmS

0:17:18.300 --> 0:17:22.550
<v Speaker 2>or WhatsApp referrals that you get. Yeah, go ahead utilize it.

0:17:22.560 --> 0:17:25.250
<v Speaker 2>It helps but eventually goes back to whether or not

0:17:25.250 --> 0:17:28.900
<v Speaker 2>you felt that this digital bank or the service that

0:17:28.900 --> 0:17:31.740
<v Speaker 2>they're offering you. Does it cater to you? So you

0:17:31.740 --> 0:17:35.389
<v Speaker 2>put yourself as the category of the under surf.

0:17:35.960 --> 0:17:39.720
<v Speaker 2>So if I want to really squeeze the returns of

0:17:39.730 --> 0:17:43.210
<v Speaker 2>my deposits, if I really want to get the best

0:17:43.210 --> 0:17:48.490
<v Speaker 2>rebates out of my purchases, my spending, does this offering

0:17:48.500 --> 0:17:52.419
<v Speaker 2>cater to your needs? If it does eventually, you go

0:17:52.420 --> 0:17:56.780
<v Speaker 2>back to those apps to the digital banks. If the

0:17:56.780 --> 0:17:59.870
<v Speaker 2>traditional banks are able to offer this as well, we

0:17:59.869 --> 0:18:02.640
<v Speaker 2>have as consumers, no complaints.

0:18:03.310 --> 0:18:06.610
<v Speaker 2>You have more choices. Thank you so much. Thank you.

0:18:06.609 --> 0:18:09.420
<v Speaker 2>Thank you for having me. Thanks to my guest ken

0:18:09.420 --> 0:18:12.400
<v Speaker 2>chan and we hope you enjoyed this episode of money,

0:18:12.400 --> 0:18:17.070
<v Speaker 2>talks the team behind this podcast. This Jacqueline chan, Joanne, chan,

0:18:17.119 --> 0:18:21.510
<v Speaker 2>daniel lee and Christina robert. We've gotta refresh slate of

0:18:21.520 --> 0:18:24.690
<v Speaker 2>audio material you can listen to on your commute or

0:18:24.700 --> 0:18:27.160
<v Speaker 2>your work out, go to the C. N. A. Website

0:18:27.160 --> 0:18:30.310
<v Speaker 2>or app. Look for the listen button and subscribe to

0:18:30.310 --> 0:18:33.930
<v Speaker 2>the podcast you like If you have thoughts, ideas or

0:18:33.940 --> 0:18:36.730
<v Speaker 2>even stories you'd like to share. Please write to us.

0:18:36.920 --> 0:18:40.040
<v Speaker 2>The details are in our episode notes. Until next time.

0:18:40.040 --> 0:18:41.010
<v Speaker 2>This is Sarah called