The emerging digital banking sector is on a winning streak this year, with some big tech startups securing massive funding rounds from large-scale investors. Relatively new UK-based startup Monzo broke records last year when it raised over $1 million in crowdfunding in less than two minutes. One of its main competitors, German digital bank N26, has managed to attract 3.5 million customers since its launch a few years ago.
Most recently, Singapore announced via it's Monetary Authority that it will begin accepting applications for new digital banks, including from organizations that are not traditionally related to banking. This is a significant change, as it could potentially give an entirely new and untapped sector of online services the ability to provide financial solutions to their customers.
“It’s well overdue, in terms of more choices for customers,”
said Anthony CHIAM of J.D. Power, speaking to CNBC.
Quick and easy registration, 24/7 online accessibility and low entry requirements mean digital banking has become the choice of millions of young people the world over. Traditional financial institutions are commonly averse to change, with banking being one of the slowest industries to embrace new technology. However, with the explosion of mobile phone usage and a huge increase in internet connectivity globally, banking has finally been catapulted into the tech world of the 21st century.
"Bankers are not generally known for innovation and have been behind the curveball in the business of transformation, but things are changing on a global scale - and consumers are reaping the benefit,"
says Jason BLICK, CEO of corporate digital banking provider EQIBank.
"The question is whether incumbent banks can embrace the necessary transformations before neobanks and fintech startups gain scale and distribution in the critical Asia market?"
Speaking to the Financial Times, Citi analyst Ronit GHOSE noted the relevance of the changing landscape:
“It is our view that the new virtual banks are a major threat to HSBC’s profitability in the medium to long term."
He believes HSBC would need to significantly increase its technology budget to compete with more innovative startups.
However, not everyone is afraid of the issuance of new digital banking licenses, with a spokesperson from Singapore's United Overseas Bank telling CNBC that the bank “welcomes the diversity” that the change may bring.