Why traditional banks are still relevant in the age of digital banking

Across the region, the banking sector is witnessing a digital revolution. New virtual banks – both local and global – are emerging and attempting to disrupt banking as we know it. This is happening in markets such as China, Hong Kong and Korea. Digital payments in China account for approximately 99 per cent of the country’s non-cash transaction volume and 45 per cent of digital payments worldwide¹.

Digital banks are growing rapidly in Asia: Can traditional banks keep up?

In Singapore, the Monetary Authority of Singapore (MAS) has issued four bank licences for digital banks that will not have physical branches². Over the last year, we saw an accelerated move towards online banking because of the need for social distancing, with an increased number of customers switching to digital banking, and the government is encouraging its adoption³. According to a 2020 VISA study on digital banks, 88 per cent of Singapore’s SMEs are open to switching some services to digital banks⁴.

What do these changes mean for the traditional banking landscape — and most importantly, for the SME customer? We believe that there is space for a healthy co-existence and competition-fuelled innovation. Digital banks, operating solely online, may lack the facilities to provide a one-stop-shop, and may not have sufficient accumulated data, experience and relationships to provide the range of banking services that customers need over their lifetimes⁵. Traditional banks need to continue to leverage and build upon their distinct advantages to address customer needs.

Traditional banks have extensive network reach across channels and countries

Traditional banks like UOB, being omni-channel, combine several key advantages: they can resolve issues quickly and efficiently, and deliver a more personalised service. These advantages all improve customer loyalty⁶. A single-channel way of engagement is no longer sufficient, and in Singapore, our digital solutions are integrated seamlessly with our other touchpoints, delivering an authentic omni-channel experience for our customers.

During Singapore’s circuit-breaker period, we were able to serve and help our customers without disruption, whether they were visiting branches or conducting their banking needs, such as through our digital and mobile services.

An omni-channel presence is valuable: a study by McKinsey has found that even in digitally advanced European nations, between 30 and 60 per cent of customers prefer doing at least some of their business at branches⁷.

Furthermore, traditional banks like UOB have built a presence across ASEAN, giving SMEs leverage when looking to venture beyond our shores. Through our regional network, we are able to support the overseas expansion plans of SMEs by allowing them to tap on our resources and in-market expertise.

Long-term customer relationships cannot be replicated in a short time frame

The importance of building long-term relationships with customers cannot be underestimated. Over the years, traditional banks have a comprehensive understanding and in-depth customer data, enabling them to provide tailored solutions that are relevant to each industry and business. UOB goes beyond banking to help businesses operate more efficiently and, building on its extensive experience, customise solutions and services to suit their specific needs.

The in-depth specialist knowledge and expertise developed over time have also put banks like UOB in an advantageous position.

SMEs value a more personal approach to help them nurture their businesses, especially during a time of crisis. UOB and Dun & Bradstreet spoke with 1,000 SMEs in the region to understand their pain points during the COVID-19 pandemic and what recovery will look like. The recent ASEAN SME Transformation Study 2020 revealed that SMEs want their banks not just to be funding partners, but partners in a journey of transformation, especially during the post-COVID recovery phase.

Traditional banks provide a network for partnerships

Traditional banks have strong legacy partnerships and are in a position to create an ecosystem that helps businesses with their digital transformation efforts. According to the same ASEAN SME Transformation Study 2020 mentioned earlier, SMEs want their banks to provide digital solutions support – which we have tapped our partners’ and their services to provide digital solutions such as Shopmatic and Getz to help SMEs take their business online to diversify their revenue stream.

Beyond helping SMEs transform and go online, we work with the government agencies to help them capture new opportunities and OneSME is one such initiative. OneSME is a cross-border digital trade platform that was set up in September 2020 to assist SMEs in Singapore to expand their overseas reach⁸. The platform not only helps businesses in Singapore reach a potential buyer base of four million in China; they are also able to gain access to financing solutions from UOB.

Another partnership that UOB has is with The FinLab, an innovation accelerator that was created to help businesses on their digitalisation journey. The latest FinLab initiative, the Propel programme, was launched in August 2020 to give ASEAN SMEs a comprehensive – yet easy-to-follow – “roadmap” for digitalising their businesses. Through a simple six-step framework, SMEs learn which digitalisation areas they should prioritise via a simple 15-minute test. The test result enables SMEs to select and implement specific tech solutions appropriate to their line of business.

Established banks, like UOB that have built up experience, expertise and relationships over many years are now in a position to pioneer the latest digital technologies to help SMEs navigate the challenging times. Being awarded Singapore’s and Asia’s best bank for SMEs in 2021 is testament that our approach and philosophy is appreciated by the SME business community in the region.

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