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At the Singapore Fintech Festival 2022 that’s held earlier this month, one particular keynote saw the gathering of regional fintech players that’s active in the digital banking space.

The COVID-19 pandemic and resulting macroeconomic have impacted digital banks, and one panelist said that banks need to move faster to a higher interest rate even though this benefits traditional banks more than digital banks.

As such, it is wise to be an efficient player, have a digitally-led play, with no physical branches and rely on automation.

With the pandemic accelerating the demand for online services, the emergence of digital banks today is rather timely. But what does it take to build a digital bank, and is there even a path to profitability?

Their customer acquisition strategy is simple yet effective

There are three things to take note of when it comes to achieving profitability: cost of acquisition, a digital-led play, and maximising the value to the customers.

“In some way, digital banks have an unfair advantage because they already know what has worked and what has not. Digital banks have taken off in many parts of the world for the past eight years, because they know that initially it’s about the experience,” said Dwaipayan Sadhu, CEO of Trust Bank.

But the problem about digital banks is that people often don’t consider them as a main bank, or even as a secondary bank.

“For us, it is very clear that we want to scale in a profitable, sustainable way. The only answer is to be within an ecosystem.”

The trick is to make that journey as seamless as possible for customers — not cross-selling products, but rather, converting them into users.

For context, Trust Bank is a joint venture between Standard Chartered and FairPrice Group. The latter has many interests, but they also own of the largest supermarket chains and largest loyalty programmes in Singapore.

As a newcomer, Dwaipayan asserted that Trust Bank needed to get themselves deeply embedded into the ecosystem and create value propositions for the customers.

For instance, in their first month of operation, they offered very attractive incentives to rapidly grow their customer base.

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We were giving out bags of rice for every customer that signed up. That 1kg bag of rice costs S$3.50. Within the first month, we distributed 60,000kg of rice. And we know that banks spend inordinate amounts of money on acquiring clients, [giving away] phones, electronics, cash gifts.

Ours is a bit simple, yet why it works so well is because it is something that helps customers bring down their cost of living [and] moderate their cost of essentials. So you can imagine how our cost of acquisition as a result will be much better than what it will be for other banks.

– Dwaipayan Sadhu, CEO of Trust Bank

Combining the rigour of traditional and experience of digital

According to Dwaipayan, in order to be a successful digital bank, they needed to have a complete suite of products. So when they went to market, they were “very ambitious” and had a savings account, credit card, and insurance as part of their product portfolio.

But many other banks are also offering the same thing, so how are digital banks differentiating themselves?

“That’s why we are convinced that being embedded into an ecosystem where we can create real, tangible value is important,” said Dwaipayan.

For example, since Trust Bank is embedded into FairPrice, customers can earn rebates from it on their digital bank product.

ntuc foodfare
Image Credit: NTUC Foodfare

“It’s not just what you purchase [at the supermarket], it’s everything that you do in that ecosystem — they also operate a coffeeshop, they’re an insurance provider, among other things. The ecosystem serves one million client interactions everyday, and we’re trying to see how we can embed ourselves in each of these interactions,” he explained.

“Creating a savings account that’s fantastically different from a savings account of what another bank is offering is possibly difficult, but it can be embedded into the ecosystem and offer users tangible benefits — that itself is extremely difficult for somebody else to compete with.”

He went on to point out a few other things that traditional banks find very difficult to solve, such as simple experiences like redeeming points.

“There are still banks that send rewards vouchers to users as a snail mail. I don’t even know when’s the last time I checked my mailbox. This is a small example, but still a pain point, and we hope to improve such experiences and possibly revolutionise experiences,” he said.

Regardless, he acknowledged that traditional banks tend to do many things well, such as risk management, compliance and regular product management.

My view is that for the newer digital banks to really survive, they need to combine the rigour of risk management, compliance and traditional product management well. I think that’s what we have all learned over time from the successes and failures of the other digital banks.

For digital banks to survive, you must have fantastic products [and] fantastic experiences. Hopefully it will be embedded into an existing ecosystem, which gives you the right to operate at a far lower cost. But at the same time, you must build up your muscle in selling and deepening relationships to be a primary bank.

– Dwaipayan Sadhu, CEO of Trust Bank

However, the digital bank tech stack will eventually be outdated, so how are they hedging themselves against that?

Dwaipayan admits that they are indeed building something that’s modern and tech-forward, but he also stressed that they are not building everything themselves.

“We’re actually partnering with a lot of providers who do something very well — somebody who does device authentication well, somebody who does fraud monitoring well, somebody who does device authentication well. Instead of building all of this, we’re actually partnering with them and that helps us [with] speed execution and also hedges the [said] risk.”

“These guys really know how to keep themselves updated and how to build fantastic products. So for us, there is always a need to stay on the curve”.

But does Singapore even need a digital bank?

trust bank singapore fintech festival 2022
Dwaipayan Sadhu, CEO of Trust Bank (extreme left) speaking at Singapore Fintech Festival 2022 / Image Credit: Vulcan Post

Despite banks digitalising themselves, there still exists an “experience deficit”.

Citing an example, Dwaipayan said that although banks are opening up their services digitally, there are still some services that can only be done during opening hours.

With digital banks open 24/7, it provides a definite edge against the traditional banking players.

When we launched two months back, we were very surprised to see that a lot of our customers were actually signing up for our product after 12 midnight. Many of us are watching Netflix shows till midnight anyway, so if you’re awake and have nothing better to do, possibly you’re thinking about the stuff that you didn’t manage to do in the day. So between 12am and 2am actually [recorded] one of our highest application numbers.

So if you are not available at those times, you are losing out on some customers who actually want to bank with you.

– Dwaipayan Sadhu, CEO of Trust Bank

He added that in today’s digitally-driven era, it is impossible for someone to not adopt digital solutions and services one way or another. This signals that the society, as a whole, is getting more receptive towards digitalisation, and this is an optimistic sign for digital banks — that “customers are very willing to try”.

As a testament, one particular finding of a recent study revealed that over eight per cent of Singaporeans aged 60 years old and above are using digital banking services.

For Trust Bank, about 10 per cent of their customers fall in the above 65 years old age bracket. This was not something that they initially thought was possible, but it proves that they have successfully attracted a “very diverse set of customers”, which gave them a lot of confidence in building a long-term sustainable model.

And although there were a few digital banks that have launched in the past month, the traction has been quite encouraging.

“In the last two months, we have seen very enthusiastic reception for ourselves. We have 100,000 customers joining us in the first 13 days, and over 300,000 customers in the first two months. This really shows that there is a demand in the market for a very seamless, value-driven product in spite of the presence of other strong digital banking services.”

“The onus is on us to create fantastic experiences and great products, creating real, tangible value that will make the customer choose us as a primary or secondary bank.”

Featured Image Credit: Trust Bank

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