Is branch banking still relevant as Singapore lenders migrate their services online?

The branch-lite push could result in lower office space demand.

With the use of mobile banking in Singapore easily overtaking physical branch interactions by 15% in the past year, there is some question whether doing financial transaction at branches still remains relevant for a population that has gotten used to living their life on the screen.

Nearly eight in 10 Singaporeans are considering opening an account with branchless banks, according to a survey by management consultancy firm McKinsey. Of this number, more than a third (35%) are willing to transfer their account assets into a digital wallet.

Also read: 9 in 10 Singaporeans want fingerprint and facial recognition in banks

Singapore's strong preference for doing much of their retail banking services via mobile can be largely attributed to the efforts made by banks to digitise their services through emerging technologies like big data, biometric and AI.

In recent months, DBS unveiled a chatbot, POSB digibank Virtual Assistant, allowing customers to perform transactions via Facebook Messenger. Not to be left behind, OCBC rolled out an algorithm-based robo-advisory service for its wealth management arm whilst UOB launched contactless ATMs.

“Local Singapore banks have done well to implement tremendous improvements in terms of digital channels over the last few years. They have taken advantage of a disruptive environment composed of FinTechs, non-traditional competitors, and have excelled to deliver innovative functionalities,” according to Kok Yong Ho, Financial Services Industry Leader at Deloitte Southeast Asia. 

It helps that regulation in the lion city remains more than progressive in terms of risk management, Ho noted, amidst the inherent risk of digitising financial services especially in light of the recent SingHealth cyberattack where the personal records of 1.5 million individuals were illegally accessed and stolen.

Also read: Singapore banks urged to tighten verification processes after SingHealth fraud

“In Singapore, the role played by and the support given by our Government as well as bodies such as the Monetary Authority of Singapore (“MAS”) and the Association of Banks in Singapore (“ABS”) to the banks is a clear strength. Strategies and blue prints have been laid out years in advance and the banking industry is provided with clear direction in the digital banking space,” Ho added.

However, the ongoing migration of financial services to mobile begs the question whether branch banking still remains relevant in Singapore as lenders could easily save up on rent and manpower costs by trimming down on their bloated branch network.

“[W]hy even have branches and pay rent and staff costs to service the branches when banking can be carried out online or on mobile devices?”, according to Choon Fah Ong, CEO of Edmund Tie & Company. “With the convenience of mobile banking anytime, anywhere, customers are moving towards mobile banking. So banks adapt to the trend and save costs at the same time, making them more nimble and cost efficient."

Although the impact on the property market could be hard to accurately measure as bank branches seldom occupy standalone buildings due to their location in shopping malls or office buildings, banks could save around $10,000 to $70,000 monthly which is the going rent for a typical bank branch, according to Huttons Asia.

Ong, however, is of the belief that the trend will be much more felt in the property market in the long term. “The reduction in banking space is part of the global trend affecting the way we live, work and play – enabled by technology. Overall, there will be lower demand for office space as technology enables us to work any where, any time, and not just from offices.”

On his part, Deloitte’s Ho suggests that the migration of banking services to online is more an evolution than an extinction of banking as we know it.

“Whilst telephone and online banking have caused customers to migrate from the bank branch to new channels, the traditional banking business model arguably remains broadly unchanged," he said. “Retail banking has faced a number of disruptive threats in the past, but each time the traditional banks have adapted and grown stronger."