This is 1 Burning Threat Singapore Banks Cannot Ignore

Singapore banks are on a burning platform.

This was a characterisation suggested by Piyush Gupta in a Bloomberg interview last year. Gupta is the chief executive of DBS Group Holdings Ltd (SGX: D05), Singapore’s largest bank.

In the interview, Gupta said that the world of banking could be disrupted by technology companies such as AliBabaAlphabet or Facebook. In his opinion, customers and businesses were shifting their banking engagement to online and mobile. It is imperative that DBS Group and its peers respond to the shift. Gupta said:

“I think it’s a burning platform for our industry. We either respond to the way consumers and businesses do their banking in the future or we die.”

As Gupta would put it – people won’t need a bank, people need banking in the future. The same thought may have crossed the mind of Wee Ee Cheong, chief executive of United Overseas Bank Ltd  (SGX: U11), one of the big three in Singapore’s banking scene.

In a recent earnings briefing for UOB’s 2015 fourth-qarter earnings, Wee spent some time discussing the topic. The slide below summarises UOB’s efforts in the digital space:

2016-03-18 UOB Mobile Internet Slide
Source: UOB’s earnings presentation

Wee shared his thoughts on this matter:

“To engage and better serve customers needs in a digital age, we are building capabilities to stay relevant in the lives of our customers through providing convenience and seamless connectivity. In 2015, we made good headway in enhancing our customer’s experience.

While we reformatted and automated a number of branches, we also transform our website and internet banking platform, and set-up engagement in social media, resulting in more activities on these platforms.”

UOB has been busy on this front. Wee talked about UOB Mighty, a mobile app that can be used as a digital wallet and for payments. UOB is also collaborating with several FinTech players for a number of initiatives. The bank is also playing its traditional banking role by providing financing for start-ups. These efforts can even improve UOB’s innovative spirit, as Wee notes:

“The FinLab also strengthens the innovation culture within UOB, where selected employees are put through the rigour of an innovation lab, facilitated by experienced accelerators.”

Lately, Singapore banks have been under the spotlight for issues like their exposure to the troubled oil and gas sector and the slowdown in China’s economic growth. However, Gupta had another warning during the aforementioned Bloomberg interview:

“The problem is, for the last five years, banks have been distracted. We had other issues to deal with. Capital, liquidity, GFC (Great Financial Crisis) and so on. That has allowed our non-banking competitors to take advantage of our absence and get a headstart. But time is running out for us, so we have to be able to focus and respond very quickly.”

It is refreshing to see UOB move beyond the concerns of today, and take time to explain its digital efforts. Wee said that UOB will embrace this change as he expects this online and mobile threat to hit mature industries such as banks over the long run. And as Gupta suggests, time could be running out for the banking industry to respond to this long term threat.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong owns shares in Alphabet and Facebook.