Singapore SMBs hopeful digital banks will yield cost, operational benefits

With their segment still largely untapped by current players, most small and medium-sized businesses in Singapore are optimistic digital banks will bring down the overall costs of banking and improve service efficiencies.

A majority of small and medium-sized businesses (SMBs) in Singapore are optimistic that digital banks will help slash their overall banking costs and bring about greater service efficiencies. Some 88% will consider moving some services to neobanks, as the country prepares to kick off its digital banking regime later this year. 

SMBs in Singapore expressed frustration over a lack of good corporate products and control of their banking experience, according to a Visa study released Tuesday. Conducted in March, the survey polled 513 respondents who were employees or decision makers at local SMBs. 

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They pointed to a need for greater convenience, value, and the ability to track payments and manage cashflow. Some 85% preferred personal banking products over corporate options because the former provided greater convenience and value. About 53% used personal bank accounts for their business transactions with the belief that interest rates on corporate accounts fell behind those of personal accounts. 

The apparent gap in expectations and service delivery reflected an untapped SMB segment that digital banks could address. The study found that 55% of respondents believed digital banks could lower their overall banking costs, while 54% said they could gain more convenience, and another 53% pointed to greater ease in paying bills online. Some 58% also lauded the 24/7 availability digital banks provided and 56% appreciated the ease of making digital payments and transfers. 

Visa's country manager for Singapore and Brunei, Kunai Chatterjee, said: "The digital banking experience for SMBs has not evolved at the same pace as consumer banking and the services that exist are not as sophisticated. With traditional banks looking to become more digitally focused and new neobank challengers introducing innovative solutions to serve this segment, we believe more SMBs will embark on their digital transformation journey adopting digital banking services or embedding digital solutions into their day-to-day business processes."

In fact, 49% of SMBs said they were already using digital tools for their accounting, while 48% did likewise for payroll, 47% for invoicing, and 46% for claims processing. Another 51% said they bumped up digital payments for subscriptions to third-party services, as did 50% for their utility bills, 49% for travel expenses, and 49% for employee salaries and bonuses.

However, just 16% indicated they were willing to move all services to digital banks, which suggests a segment remain somewhat conservative with their digital use. 

Most SMBs in the country likely would use a combination of services from both traditional and digital banks, with 60% doing so for loan applications and 58% for insurance applications. Asked what services digital banks should offer, 72% pointed to reduced or no rates for services and 72% cited alerts to relevant government and support grants. Another 70% would like a consolidated dashboard to manage their expenses. 

SMBs did have some reservations about digital banking services, with 38% expressing concerns about technical errors such as platforms crashing, while 35% cited tardiness in service response, and 34% worried about potential security breaches. 

Chatterjee said: "Traditional and digital banks need to provide trust and control to be able to credibly service this underserved and diverse segment, and provide flexibility and customisable services that can help SMBs of all sizes succeed in this new digital environment."

Singapore is preparing to announce the list of successful bidders for up to five digital bank licences by the end of this year, with these players expected to commence business by mid-2021. 

To succeed in the local market, observers said digital banks would need to ensure they have a sustainable growth strategy and use data to differentiate their services. They also pointed to a need to better serve the SMB segment, as traditional banks -- in Singapore and worldwide -- have failed to keep up with these businesses' changing requirements and increased demands for banking services. 

There are some 270,300 SMBs in Singapore, hiring 73% of the local workforce. 

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