Banking

Digital vs. Conventional Banks: Benefits of Digital Banking

Digital banks are new in Singapore, learn the differences between digital and conventional banks. Which banks are you available locally right now?

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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

singapore bank skyscrapers

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:

Digital BanksConventional Banks
Scope of ServicesMainly retail bankingHandles full range of banking services
Customer Support24/7 chat support and ability to address critical issues24/7 chat support, complex issues may take longer to resolve
Target Customer AudienceMainly retail clients (including SMEs)All types of clients
Service ChannelsElectronic Channels
  • Bricks-and-mortar branches
  • Electronic channels
Minimum Account Balance Requirements / Low Balance FeesN.A.At the discretion of the bank:
  • Account Balances
  • Overdraft Fees
  • Other Payments
Interest Rates On SavingsHigher as an incentive to opening a virtual savings and deposit accountLower due to cost of maintenance

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.

Related: Best Bank Accounts in Singapore

All You Need to Know About Digital Banks

using credit card at a shop

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 0.50% to 1% 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

gxs bank

Launched on 31 August 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% on your main savings account and up to 3.48% 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

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% 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%. This allows customers to earn NTUC Link Points rebates at an accelerated rate.

As a bonus for Trust members, one is entitled to 1% bonus interest by simply making 5 purchases using their Trust card within that month. Union Members get to enjoy 0.5% interest for their deposits of up to S$75,000 and this is possible with the partnership with Fairprice Group. Together with 1.5% base interest on a Trust Savings account, this will give you an interest rate of up to 2.5% per annum.

Alternatives To Digital Banks (In Terms of Offerings)

Best Debit Card for Boosted Savings Rate: UOB One Debit Visa Card

UOB One Debit Visa Card
UOB One Debit Visa Card
Consider this if you want a boosted savings rate

ValueChampion also offers similar services with the UOB One Debit Card with a high interest rate going up to 2.5% and 3% cashback on online shopping, groceries, health and beauty, convenience stores, transport, food delivery and petrol.

Low-Risk Starter Account for Young Adults: OCBC Frank Savings Account

PROMO: Pair your FRANK account with FRANK Debit Card for 1% Unlimited Cashback
Consider this if you want a fee-free starter account for Young Adults
  • Min. Age Requirement
    • 16
    • Min. Initial Deposit
      • S$0
      • Min. Balance Requirement
        • S$0 if younger than 26 years old, S$1,000 for 26+

        OCBC Frank Savings is a fee-free starter account for young adults. Account holders earn according to one of the simplest rate structures on the market: the 1st S$25k of a balance earns 0.10% p.a., the next S$25k (up to the S$50k mark) earns 0.20% p.a., and any remaining amount (beyond S$50k) earns 0.05% p.a.

        Related: Best Cashback Credit Cards in Singapore 2023

        Conclusion

        lady using credit card machine in a cafe

        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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