Banking has developed over the last decade. 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 when you had to queue at a local bank to open an account, make a deposit, transfer money, or cash a check. With more state-of-the-art solutions and technologies arising, digital banking is attracting millions of new customers at an accelerating rate.

In 2022, other than digital banking services, digital banks have made an appearance in the banking scene in Singapore. This includes Trust, a joint venture between Standard Chartered and Fairprice, as well as Grab and Singtel’s digital bank offering.

What are the key differences between fully-digital banks and conventional ones? Read on to discover the basic differences between digital and conventional banking as well as how digital banks are setting the next frontier innovation in the financial services sector.

Key differences between digital and conventional banks

One of the key characteristics of a digital bank is that it has no brick-and-mortar branches, and its services are offered solely through the internet.

Besides, a digital bank differs from a conventional bank the range of services, customer base, and account balance requirements:

Both digital and traditional banks have their unique specificities and play a crucial role in accessing or operating the accounts of the respective users.

Digital banks adopt a do-it-yourself approach where customers can self-serve through the various electronic channels offered.

While traditional banks do offer the same do-it-yourself approach through digital banking services, they also offer customers the opportunity for face-to-face interaction and servicing, which is required when it comes to more complicated financial transactions.

On the flipside, however, this means that there will be more cost incurred on the bank’s side, which will be passed down to the customer.

All you need to know about digital banks

Digital banking consists of any banking transactions 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 at the physical premises to the customer’s digital device.

It covers cashless digital activities like fund transfers, deposits, withdrawals, account balance checks, bill payments, and investments linked to account checks.

Digital banking also provides an ecosystem to enjoy seamless banking services with speed, accuracy, and ease. It relies on different technologies to provide services through several interfaces.

There are three main perks of digital banking.

Convenience

It is without a doubt that digital banking provides the ultimate convenience since you are able to access your accounts at any time instead of planning banking activities within a branch’s operating hours.

With digital banking apps that are more accessible nowadays, there are more useful tools to carry out more detailed financial transactions at the leisure of your home.

This autonomy in digital banking brings more favourable transactions to track your finances on your own accord and schedule.

Lower fees

Due to lower overhead costs in managing digital banks compared to traditional banks, they operate at a much lower cost. As all operations run online, there are no costs to support branches to be open.

With the reduction in costs trickling down to the bank’s customers, there will be a significant reduction in fees required to be accounted for. This includes any monthly dues on your accounts, overdraft fees, and more.

Digital banks will then have more control over the money the customers invest, adding more to the savings over time.

Higher interest rates

Digital banks usually offer compelling rates compared to traditional banks. This helps to increase the return of any investments made from savings accounts and helps customers to reach their respective saving goals faster.

Some financial institutions offer between 0.5 per cent to 1 per cent interest on their savings accounts which is 10 to 20 times more than the base interest rates offered by conventional banks.

Integration of digital banking in our lives

As digital technologies have played a well-established key role in most digital banks’ operations and customer relationships, digital collaboration is the practice of people working together through online means like software-as-a-service (SaaS) platforms.

As it has provided a natural extension of the need to work remotely during the Covid-19 environment, it offers tremendous productivity gains and pleases customers through greater speed and simplicity across a broad range of bank products.

More and more people are today turning to digital banking due to the ease, convenience, and simplicity of digital banking. Moreover, the customer-centric approach and personalised services are major attraction factors for digital banks.

The supporting government and regulatory policies have also acted as a catalyst for digital banks to play a pivotal role in the cashless economy.

GXS Bank and Trust Bank in Singapore

GXS Bank

Launched on Aug 31, 2021, GXS Bank is one of the Lion City’s first digital banks for consumers and businesses.

Backed by a consortium including Grab Holdings and Singtel, it offers a savings account with a customisable pocket feature that can help customers in topping up their pockets and reach their saving goals faster.

As this app includes features to serve financially underserved customers and drive financial revolution for customers by using secure and ethical technology and data, it has boosted confidence for more customers to develop stable saving habits without too much commitment.

How does this work? GSX has allowed their customers to create up to eight Savings Pockets in their account and the ability to transfer funds from their main savings account into these pockets.

You are able to get an interest rate of 0.08 per cent on your main savings account and up to 3.48 per cent per annum on each Savings Pocket.

Even better, interest is accrued daily instead of monthly so you are able to earn interest on your interest.

Trust Bank

Just one day after the launch of GXS, Trust Bank, a collaboration 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 transaction, cash advance, and card replacement free.

With a Trust Bank savings account, one gets to earn up to 2.5 per cent interest per annum on the first S$75,000 balance.

Additionally, the Trust debit card enables and empowers the customers to enjoy great savings on daily necessities via integration with FairPrice Group’s Link Rewards program of up to 11 per cent. This allows customers to earn NTUC Link Points rebates at an accelerated rate.

As a bonus for Trust members, one is entitled to 1 per cent bonus interest by simply making five purchases using their Trust card within that month.

Union Members get to enjoy 0.5 per cent interest for their deposits of up to S$75,000 and this is possible with the partnership with Fairprice Group. Together with 1.5 per cent base interest on a Trust Savings account, this will give you an interest rate of up to 2.5 per cent per annum.

Conclusion

Digital banks promise to overcome the shortcomings of the traditional banking system. The financial services industry continues to grow, with more non-bank players entering the market.

As a result, banks have started rethinking their strategies to ensure they remain relevant to modern consumers.

Traditional banks, with their personal care, remain important to consumers.

With the ever-growing range of online banking services, it’s wise for conventional banks to not just focus on keeping up to date digitally by acquiring or partnering up with Fintech companies, but also retain the personalised service that traditional banks have offered in the past as well.

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This article was first published in ValueChampion.