PressReader – DBS and UOB’s Strategic Edge in Digital Banking

Five years after the Monetary Authority of Singapore (MAS) issued licences for digital banks, DBS Group Holdings CEO Piyush Gupta expressed confidence in the bank’s position despite the rise of new digital-only competitors.
At DBS’s first-half fiscal year 2024 results briefing, Gupta affirms, “There is no digital bank out there which has created digital capability or experience, or products or solutions better than we have.” Gupta acknowledged the potential threat posed by these new entrants but highlighted that Singapore banks had made significant efforts to be as credible as any digital player. However, the main concern lies within the pricing strategies of new banks, regardless digital or traditional, they frequently utilise tactical discounts like grocery coupons for new sign-ups to entice potential customers. Fortunately, aggressive pricing tactics are typically proven to be short-lived.

According to Gupta’s point of view, digital banks frequently compete in niche sectors, leaving the broader market, such as wealth and asset management predominately untapped. This allows DBS to maintain a competitive edge across numerous segments. Since DBS’s Current and Savings account (casa) operations are expanding, it is difficult for them to rely solely on digital. For this reason, the bank’s “phygital” strategy—which combines its physical presence with digital capabilities—is essential to expanding into various regions. For instance, DBS, which has 500 branches in India and 50 branches in Indonesia, has been experiencing notable growth of casa, particularly in these two countries. Customers still prefer to physically visit the branch, even though they can access the desktop and mobile app (digibank) for DBS services. For casa to successfully sustain its development, DBS needs to be “phygital” as digital alone will not suffice.

In regard to the bank’s digital efforts, DBS continues to refine its product offerings and ensures that an extensive selection of services is accessible on mobile devices across all of its markets. At the moment, the bank is working on introducing more artificial intelligence (AI) tools into its offerings, which Gupta considers to be “very constructive”. In fact, DBS uses AI to perform 30 million nudges annually in Singapore. While the bank does not have as many nudges in its international markets, it is establishing the capacity for the rest of its markets to follow suit.

Similar to DBS, United Overseas Bank (UOB) sees itself as having a competitive advantage over purely digital banks. UOB has retained its position in casa growth, despite the rise of digital competition. According to Jacquelyn Tan, Managing Director and Head of Group Personal Financial Services at UOB, the bank has maintained its market share on both cards and casa for the past five years. From 2022 to 2023, UOB generated 66% increase in card fees income and secured over 600,000 new customers across Asean, with more than 50% attained through its TMRW app.

During UOB’s corporate day held in Kuala Lumpur on Aug 14, 2024, Tan  noted that digital engagement among customers rose from 58% in 2022 to 70% at the time of the presentation, while offline engagement plummeted from 42% to 32% in the same period. This transition complements UOB’s omnichannel strategy, which is comparable to DBS’s “phygital” approach of combining digital channels for lower-value transactions and physical branches for higher-value services.

With this strategy, Tan highlighted that more than half of new-to-wealth customers are gained digitally, with forecasts of reaching 65% by 2026. Likewise, 70% of unit trust transactions are digital, with a projected increase to 80% by 2026. UOB’s extensive collection of services via the TMRW app enables effective cross-selling and enhanced relationships with customers who will become increasingly involved in the bank’s ecosystem.

Tan emphasises that digital banks need to supply a comprehensive suite of products, including wealth and 360 savings, to address their capability to grow at scale and with quality to stay ahead in the market. UOB’s TMRW app boasts average account ticket sizes ranging from $2,000 to $8,000, in its other Asean countries, and they can exceed $20,000 in Singapore. With these figures, UOB can enhance the casa asset under management (AUM) by introducing digital wealth products to customers, further integrating them into the bank’s ecosystem.

Henry Choi, Head of Group Retail TMRW, pointed out that UOB’s digital banking app has incorporated machine learning models to deliver personalised offerings to actively engage with customers and is consistently inventive throughout its four markets: Singapore, Malaysia, Thailand, and Indonesia.

While UOB encounters shortcomings in branch counts outside of Singapore, its digital bank aids in levelling the playing field. Choi discovered that the significance of traditional banks is often underestimated; in customer interviews, individuals stated that their choice of UOB or DBS was influenced by their trust that a concrete brick-and-mortar business is supporting them. This reassurance prompts them to download the app.

DBS and UOB sustain their market position in digital banking by pairing digital innovation with traditional services, ensuring steady growth and adaptability amidst the rise of digital-only banks.