Neobanking might seem too good to be true—no physical branches, no long waits, low fees, and easy access. All your finances can now be controlled entirely from your smartphone. That’s a far cry from the structured banking processes we’ve been used to.
It might seem difficult to grasp the concept of a digital bank, but the neobank revolution isn’t stopping for anyone. Since 2015, there has been a 200% increase in the number of digital challenger banks globally, of which 20% operate in the Asia Pacific.
Recently, the Monetary Authority of Singapore (MAS) granted digital bank licenses to four successful applicants.
Ant Group and a consortium compromising of Greenland Financial Holdings, Linkologis Hong Kong and Beijing Co-operative Equity Investment Fund Management were both awarded a Digital Wholesale Bank (DWB) license, while SEA, and a consortium comprising of ride-hailing giant Grab and Singtel were awarded with Digital Full Bank (DFB) licenses.
According to Today Online, Digital wholesale banks will target small to medium sized enterprises (SMEs) and non retail customers, whereas digital full banks will be allowed to receive deposits from retail customers.
Although digital banking isn’t a new business venture, this is the first time MAS has provided non-banks such as tech-companies to apply for digital bank licenses
As a relatively new form of banking, it isn’t that far of a stretch to assume that people would be skeptical about the reliability of digital banking. In fact, some of the most common misconceptions about neobanking include skepticism about its safety or ease of use.
We’re here to clarify some of the common misconceptions that people might have about neobanking.
With many businesses going digital, data protection is one of the main questions on everyone’s minds. As neobanking is a platform that offers financial services, the concerns regarding its security are entirely valid.
In Singapore, all neobanks are to comply with the Payment Services Act, following MAS guidelines. Neobanks with no banking licenses such as Aspire partner with tier-1 partner banks such as DBS to provide payment services to consumers. In this case, your funds are strictly held in a trust account, and are secured tightly.
Entities that have been provided with the DFB licenses will also have to pass through a phased-in approach as part of a transitional period. This is to ensure the applicant’s ability to meet its commitment to customers and MAS’s supervisory requirements. After this period is over, the digital bank can then conduct all banking business like a normal bank.
Similar to traditional banks, neobanking platforms also have strict access requirements. Digital security encryption ensures that your data is protected, and all app and web logins are protected with a user PIN. Oftentimes, two-factor authentication is needed to approve any transactions taking place on the platform.
Contrary to popular belief, this is untrue. As Neobanks operate entirely online, with no physical outlets, they cut down on operation costs. These cost-savings—approximately up to 40%—are then transferred to their consumers.
Most of the time, neobank services such as business bank accounts come with no monthly or minimum fees. Not having to travel down to physical bank locations also means that customers are able to save on transport costs when neobanking in Singapore.
Some digital banks actually provide round the clock customer service. Other than relying on traditional channels such as phone and email, neobanks are changing the customer service game by expanding to more digital channels.
Customers can now reach out to customer service via messenger apps such as Whatsapp, in built chat services, and social media platforms for a faster response. This multi-channel system helps neobanks stay on top of queries and issues, and increases their response rate to customers.
The thought of a fully online banking service might seem a little daunting, especially to those who aren’t tech savvy. However, digital banks pride themselves at providing streamlined banking products and educating their users on how to manage their finances. This makes it easier for first-time users to understand how the application and processes work.
Highly personalised accounts and reports are also one of the best parts of digital banking— business insights are broken down into bite-sized, easy to understand information.
Neobanks operate under the knowledge that customer actions are extremely fluid and dynamic. Being completely digital allows neobanks to better understand customer behaviour and make necessary user-interface changes according to customer feedback. Thanks to cloud-based technology, neobanks are able to adapt to changing customer needs faster than any traditional bank.
These digital banks also appeal to the younger generation—tech-savvy millennials. With no ties to traditional banks, and a penchant for easy digital access, the fuss-free and user-friendly applications neobanks operate from are enticing products for younger consumers.
The ASEAN region in particular sees around 30 to 80% of the adult population in several countries remaining unbanked. Although most fall under lower-income brackets, they too tend to be mobile-only or mobile-first. This means that they’ll be more likely to consider hopping on to the neobanking bandwagon than heading down to a traditional bank branch.
Though neobanking is still used by many to supplement traditional bank accounts in many parts of the world, its dedication to innovation and customer satisfaction is slowly piquing the interest of consumers worldwide.
Here in Singapore, people are obsessed with efficiency, effectiveness and affordability. Digital banks provide an array of interesting alternative financial products to the traditional bank services many are used to. As the number of digital banks increases locally, we might slowly see a complete shift in customer take up rate from traditional bank options to digital banks.