Serving up value for the overbanked customer

April 28, 2020

Singapore has seen a ‘gold rush’ of sorts to making digital banking a reality once and for all by the end of this year. All eyes are on which contenders – hailing from a wide range sectors including property, e-sports and telco – will be awarded one of the five licenses on offer.

The Monetary Authority of Singapore (MAS) had originally planned to announce the successful digital banking applicants in June 2020, but due to COVID-19, it has postponed its decision to second half of 2020.[1]

Once in, digital banks are claiming to give the incumbents a run for their money. The Singapore Government already has infrastructures in place that have enabled incumbent banks to develop advanced digital solutions.[2] Digital banks here are positioning themselves as a gamechanger in terms of customer experience, but if local citizens are already financially well set-up, is that enough of an incentive?

With more bank branches and automated teller machines (ATMs) per 100,000 people[3], Singapore has a predominantly “overbanked” population, in the sense that most citizens have more than one account with a financial institution[4]. In Southeast Asia’s most banked country, almost two-thirds (60 per cent) of adults have access to financial services here.[5]

This pandemic is also ushering in the one of the last groups resistant to digital banking: the elderly. OCBC Bank reported that during this time, it observed a 20 per cent increase in digital adoption among customers 60 – 80 years old, compared to just 7 per cent in other segments.[6]

Once the adoption hurdle has been crossed, this could be a new demographic for digital banks to target, as the elderly population in Singapore rises, with one in four Singaporeans projected to be aged 65 and above in 2030[7].

Understanding how to work with a unique market such as Singapore’s is the only way digital banks will truly achieve true differentiation

Not all will jump on the bandwagon when digital banks arrive onshore

The overbanked customer utilises financial services in new ways, unafraid to juggle a variety of financial service providers to achieve the better yield for their savings and investments.

A recent PwC study revealed that 40 percent of younger customers and higher-income individuals would only consider opening a digital bank account if that bank is “popular and successful.”[8]

In the same study, 99 per cent of customers indicated that they would keep their existing bank account even after opening a digital bank account, with many respondents citing personal data concerns and stability of digital banks. It is clear that trust is a hurdle that digital banks will need to address once they finally come into play.

Rewards and incentives also play a big role in the overbanked customer’s decision to switch banks.

According to a CGS-CIMB poll, customers were not interested in using a digital bank credit card unless it had better offerings than their current bank. [9] Industry experts are already expecting digital banks to have a high burn rate, and project that offering attractive rates and promotions to attract customers could be a potential pitfall and erode the digital banks’ margins during the initial phase.

Creating better experiences will be the lynchpin of retaining customer loyalty

In order to avoid this, digital banks need to be aware of their customers’ needs and provide them with both financial and non-financial offerings. Creating seamless experiences and ongoing engagement online is the key differentiator that will help digital banks make up for their absence of human touchpoints that customers are used to.

Most financial institutions have already transformed their retail user experience, offering mobile apps with a full suite of services that can be accessed at the touch of a button, with best-in-class design principles.

According to Salesforce, 82 per cent of customers in Singapore expect companies to use new technologies to create better experiences.[10] Financial services is no longer a basic need, but a value-add to the overbanked customer’s life.

Mobile banking features, e-wallets and seamless money transfers – overbanked customers have seen and used them all. And they want something more.

They expect their banks to come up with compelling incentives in exchange for their loyalty, and to anticipate their needs in very much the same way companies like Google and Facebook have managed to achieve. In fact, experts from WeBank and Sberbank have said that financial institutions must operate more like technology companies in order to stay relevant for years to come.[11]

The future of FinTech is about riding a wave of change

The finance industry will continue to grapple with what the next generation of banks and payment systems will look like for quite some time.

FinTechs have been responsible for this shift – actors outside the inner circle of financial services who have taken a more prominent role within the ecosystem. At the heart of this emergence is the empowered customer seizing control of his overall financial journey.

The industry is doing away with the cookie cutter approach to customer service. Customers have been spoiled by companies with constant customer-based added value products and services that keep enhancing user experience and satisfaction.

Financial services must move away from focusing on incremental changes such as a new feature on the app or better user experience. They must start developing genuine and lasting relationships that revolve around tailoring products, pricing and services provided to each customer.




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