GXS Bank, MariBank and Trust Bank reported an increase in total income in 2023 but fell deeper into the red. — The Straits Times
SINGAPORE: Digital banks have been up and running for about two years here but turning a profit remains as elusive as ever.
The three banks serving retail customers, GXS Bank, MariBank and Trust Bank, reported an increase in total income in 2023 – the latest numbers available as they report only full-year results – but fell deeper into the red.
“It is a journey. The digital banks are still in their early days,” said GXS Group chief executive Muthukrishnan Ramaswami or Ramu.
GXS Bank, which is backed by Grab Holdings and telco Singtel, tripled revenue to S$14.3mil in 2023.
However, expenses mounted and sank the firm further into the red with a loss of S$152.1mil.
Similarly at MariBank, which is wholly owned by gaming and eCommerce firm Sea Group, revenue jumped sixfold to S$10.1mil in 2023, but losses came in at S$52.2mil on the back of higher costs.
Unlike its two digital rivals, Trust Bank, which is 60% owned by Standard Chartered Bank and 40% by the enterprise arm of NTUC, holds a full bank licence that allows it to offer services similar to those at DBS Bank, OCBC Bank and UOB including providing automated teller machines.
The bank stayed in the red in 2023 with a loss of S$128.4mil despite revenue jumping thirteenfold to S$39.1mil.
Tania Gold, senior director for Asia-Pacific banks at credit ratings agency Fitch Ratings, said Singapore’s digital banks are not expected to be profitable as they build market share in these early stages of growth.
They have to incur significant costs to acquire customers, develop their technology and comply with regulatory requirements, she noted.
Typically, there will be two to three years of losses, added GXS’ Ramu, who said he is not in a hurry to grow the business.
He said that GXS will add deposits at a healthy pace and will be careful about overextending loans, adding: “We have to see that pre-payments are happening and the quality of loans is good.
“We are pacing the growth, in line with the plans. We are not off track,” he said, adding that the bank will break even by the end of 2026 as stated in its proposal to the Monetary Authority of Singapore.
The digital banks had to demonstrate a path towards profitability in their five-year financial plan when they applied for the licences in 2019.
The question now is how they can grow, said Dan Jones, head of management consultancy Oliver Wyman’s digital practice in the Asia-Pacific.
Jones noted that digital banks have an edge over the incumbents because they can operate at a lower cost per customer.
They are built on a modern, scalable architecture that allows them to launch new products, features and services very quickly, “certainly quicker than has been possible over the last 10 to 20 years”, he added.
But many customers open digital banking accounts out of curiosity and do not use the account or its services, said Alan Lim, partner and head of Elevate (Digital) practice at strategy consultancy firm Simon-Kucher.
Digital banks will have to figure out ways to engage with these customers and drive more activity on their platforms, he added.
This has prompted them to expand their offerings to cover all banking needs, from savings to borrowing and spending.
Jones said the digital banks are also moving into fee-generating products like investments and insurance.
“That will hopefully give customers a lot more options and enable them to fulfil their financial needs through a digital-first channel,” he added.
MariBank is the only digital bank with an investment offering.
Mari Invest launched in September 2023, offering access to investment products, including the Lion-MariBank SavePlus fund, which is managed by Lion Global Investors, a wholly owned subsidiary of OCBC.
The fund invests in Singapore government bonds and other high-quality bond funds so it is relatively low-risk.
MariBank Singapore chief executive Natalia Goh said assets under management in the Lion-MariBank SavePlus fund grew more than eightfold within just one year of its launch. — The Straits Times/ANN
