In Singapore, 21 persons for every 100 adults owned at least 1 digital bank account in 2022, according to Singapore Business Review (SBR.) The surveyor, Finder.com, predicts the digital bank penetration rate will reach 30% by 2023.
What is A Digital Bank?
A digital bank is a financial institution providing financial or banking services through digital channels like websites or mobile apps only. It has no physical presence, such as a brick-and-mortar shop, allowing it multiple advantages over other traditional banks.
Digital banks have become popular among younger generations in recent decades due to several factors:
- Advanced technology: Faster internet speed and innovative mobile technology make banking more reliable and convenient than before.
- Increasing e-commerce activities: People have traded and bought more online, particularly during and after the pandemic, resulting in the digital banking boom.
- Government support: The Singapore authority actively promotes digital banking activities, such as launching a digital bank pilot program and providing funding for digital banks.
The digital bank industry is likely to gain more traction in the future with more favorable stimulus in the market. Knowing the differences between a digital bank and a traditional bank gives you advantages in banking.
Digital Banks vs. Traditional Banks
Here is a comparison of features of a digital bank and a traditional bank:
|Digital bank||Traditional bank|
|Account opening||Online||Required visit to a physical bank|
|Customer services||Via online chats, video calls||Via emails, in-branch, phone|
|Product and services innovation||Yes||Conventional and slower response|
|Frequency of interest compounding||Daily||Daily or monthly(depending on bank and deposit types)|
|Minimum required balance||None||Yes|
|Customer service hours||Depending on the types of services||24/7 online services|
|ATM network and coin deposit machines||Limited||Extensive|
|Procedures||Simple due to use of the state-of-art technology||Conservative and cumbersome|
|Vulnerability||More subject to cyber attacks||Less exposed to technological attacks|
You may understand more by reading the explanation below while choosing a digital or traditional bank.
Ease of use
Traditional banks have recently modified and reformed their services in response to digital banking. However, slower responses and complicated procedures with difficult-to-use technology are still handicaps confronting traditional banks.
A user-friendly interface is the primary place for a client’s interactions with a digital bank. With advanced technology-based platforms, clients can seamlessly transact all online banking activities, including fund transfers and rate checking outside regular banking hours.
Physical or online banking
One distinguishing feature is that a traditional bank has a well-established network of branches, helping clients transact, advising complex banking problems for clients, and sometimes even personal issues inside a brick-and-mortar branch. A bank may establish a better and more intimate business relationship with clients through face-to-face interactions in a physical branch. And the operation model can impose costs that, ultimately, clients should shoulder.
Without heavy expenses incurred by physical operating branches, a digital bank can enhance more benefits to clients as they deal online with deposits, loan applications, and credit/debit card transactions. Yet, digital banks should do more to project perceptions of security and explore ways of creating better relationships with existing and potential customers.
Products and services
The other characteristic is that traditional banks offer more comprehensive products and services than digital banks. Traditional banks provide more varieties of product and service offerings. Examples are mortgages, investments, insurance, checking account services, personal loans, deposit services, and fund transfers. A traditional bank can meet sophisticated clients based on past experiences dealing with clients’ needs.
Unlike a traditional bank, a digital bank sells products and services in a limited scope due to its short learning curve in the industry. Typical digital banks promote savings/current deposits, personal loans, debit/credit card services, digital wallets, fund transfers, cryptocurrency trading, and budget tools tracking customers’ spending.
As the industry expands, digital banks add more products and services to their product list, and the gap between them may narrow over time.
Most traditional banks may impose charges for various transactions, such as early account closure and fees for below-minimum balances and others to cover overheads. Traditional banks also charge more loan interest expenses than digital banks. However, it depends on individual cases on merits.
Digital banks incur fewer costs than traditional ones, transforming more savings for customers. Examples are no monthly fees or minimum balance requirements. Clients of a digital bank pay lower charges than conventional banks for services like fund transfers or crypto trading fees. Besides, digital banks do not charge against account closures and other once-off transactions.
Unlike digital banks, traditional banks handle clients’ transactions face-to-face or over-the-counter. Though digital banking activities are widely in use among convent due to higher overheads, traditional banks are less subject to cyber hacks and more to online security.
Online storage and transaction platforms are business pillars for digital banks in dealing with clients, thus prone to internet attacks or data leaks. Without solid security and backup, digital banks are targets for criminal and terrorist organizations.
ATMs, cash withdrawals, or cash coin deposit machines
An Expanded network of automatic teller machines or deposit machines creates a physical nexus where clients can bank off the branches and office hours, including fund transfers, cash withdrawals, paying bills, and other activities. Traditional banks lure customers requiring cash transactions and hard currency deals like cash deposits or withdrawals.
Even though more and more transactions go cashless, cash still plays a role in many business activities. Despite the fact that online trades are the primary business venue for a digital bank today, digital banks need a complete network of ATMs or coin deposit machines to serve customers on the island.
Customers should go through more rigorous procedures, like in-person identity verification, with other hard-paper copies, hard currencies, and paper checks, to open an account with a traditional bank. Sometimes, it may take longer to process a checking account, even shorter than before, due to competition. Formal procedures are characteristics of a traditional bank’s business.
Innovation and simplicity come the way along with the digital bank industry. A digital bank allows you to open an account online because of the advanced technology backups. Digital banks streamline the administration processes to make transactions faster and more straightforward.
Due to higher overheads, higher costs come with lower interest income for clients. Traditional banks offer clients deposit interest lower than digital banks. However, the interest gaps are not wider than expected. However, traditional banks impose minimum requirements on savings and current account deposits, likely charging clients for amounts falling short.
Digital banks have fewer account requirements and penalties on deposits and transactions due to lighter operating costs. Clients can benefit from higher deposit income as cost savings, though insignificant, pass to clients. Besides, fewer requirements and expenses for account opening and maintenance draw appeal, particularly among younger generations.
You should choose a bank based on your budget, financial purposes, long-term goals, and personal criteria for banking, be it a traditional or digital bank.
Best Digital Banks Savings Accounts in Singapore 2023
Below is a summary of the features of GXS Bank and Trust Bank:
|GXS Bank||Trust Bank|
|Interest rates(accrued daily)||2.38% p.a. for funds in the Main Account;
2.68% p.a. for funds in the Saving Pockets;
Total amounts for savings account cannot exceed S$75,000
|1.50% p.a. for deposit amounts of up to S$125,000;
+0.05% p.a. for funds above S$125,000;
+0.5% p.a. on the first S$125,000 for 5 purchases with the Trust card;
+1% p.a. for NTUC members for the first S$125,000
|Personal Loans||2.99% p.a.(EIR: 5.65%)
No fee, except for late repayment charges
Flexible repayment schedule
|3.40% p.a.(EIR: 6.24%)
No fee, except for early repayment fees within 90 days of a loan drawdown
|Credit card||Nil||21% savings on groceries and food, 22.76% on Caltex fuel|
|Insurance||Nil||Comprehensive packages of insurance|
|Reward program||The “Spend” program awards 1.2x points on Grab/Dash apps||Nil|
Headquartered in Singapore, GXS Bank was founded by Grab Holdings Inc. and Singtel in August 2022. Like the Trust Bank, the digital bank focuses on retail banking businesses, such as savings accounts, personal loans, and the “spend” program.
GXS Bank’s 3 business areas are:
GXS savings account
- 2 types of accounts: You will enroll with 2 accounts: 1 Main Account and Saving Pockets(to be determined by GXS Bank) upon successful account registration. Besides, you can transfer funds between 2 types of accounts but cannot use the funds in the Savings Pockets to pay or transfer funds to other accounts. Deposit-in money will go directly to the Main Account.
- Interest rates: You can earn a daily-calculated interest rate of 2.38% p.a. on funds in the Main Account and 2.68% p.a. In the Savings Pocket. The maximum account balance allowed in the Pocket Account is S$75,000.
- Fees: GXS Bank does not charge lock-in fees and other penalties but keeps the maximum balance of S$75,000(current level.)
- Low-interest rates: GXS Bank offers a low-interest rate of 2.99% p.a.(EIR 5.65% p.a.)
- Fees: Borrowers do not pay process fees or early repayment fees except for late repayment fees.
- Flexible borrowing: GXS counts loan interest only when a loan begins a drawdown. In other words, a ready credit line without a drawdown incurs no interest.
- Flexible repayment schedule: GXS allows borrowers to choose repayment tenure and dates, giving clients flexibility in managing finances.
GXS promises instant approval and immediate credit so clients can receive money quickly.
Spend with GXS
The “Spend with GXS” reward program allows GXS customers to earn points on Grab/Dash apps. GXS clients link their savings accounts with the GRAB/DASH apps and spend to earn 1.2 times points on their accounts.
Clients use the points earned to redeem rewards like shopping vouchers, cashback, travel discounts, and other merchandise. GXS account holders can earn 20% more points and other benefits by using the card for shopping.
Founded by Standard Chartered Bank and FairPrice Group in Singapore and launched on September 1, 2022, Trust Bank focuses on retail banking businesses, such as credit cards, instant loans, insurance, and savings account services.
More details about the 4 main businesses:
- Up to 2.5% interest rate: You can begin to earn 1.5% p.a. interest on the first S$125,000 and an extra 0,05% p.a. on the balance above S$125,000. What’s more, you can get another 0.5% p.a. bonus interest on the first S$125,000 deposit if you use the Trust card to make 5 eligible purchases. Furthermore, members of the NTUC(National Trade Union Congress) benefit from an additional 1% interest p.a. on the first S$125,000 balance.
- No requirements attached: Trust bank savings account holders are not subject to Locked-in period, Monthly fee, Minimum balance requirements, Account closure fee, Card replacement fee, and Foreign transaction fees.
- Promotion A: An E-Voucher of S$25 is available once you deposit the first S$500 into your savings account.
- Promotion B: Savings of up to 11% discount on purchases of groceries and food from FairPrice Group, and lower prices on Caltex fuel and others with an NTUC member’s Trust card.
- Comprehensive insurance services: In partnership with the “Income” insurance company, a well-founded composite insurance company, Trust Bank provides comprehensive and quality insurance packages to its clients, including home, pet, car, travel, and family personal accident insurance.
- Family Personal Accident Insurance: The Trust’s clients can pay a monthly premium of S$0.50 for whole family coverage, insuring up to S$8,000 against death and permanent total disability due to an accident.
- Home Ultimate Protect: The home insurance policy offers all-risk coverage, including building, renovation works, and home contents, against any losses and damage from accidents. Home Ultimate Protect even covers personal belongings outside your home. Policyholders can get protection of up to S$2 million from the liability of damage caused to neighbors.
- Enhanced Home Insurance: The home insurance plan is fit for insureds requiring home coverage beyond typical coverage, allowing you to determine your home insurance to avoid over- or under-insurance. Customers pay 30% less premium for a 3-year Enhanced Home Insurance plan.
- Drivo Car Insurance: Clients can get a reward of 390,000 STAR* for buying a Drivo car insurance policy, covering vehicle repair, towing services, third party, personal accident benefits & medical expenses coverage, and roadside assistance & wellness coverage.
- Travel insurance: The travel insurance policy offers coverage of personal belongings, personal accidents, medical expenses, and losses due to delays not willingly caused while traveling overseas. Coverage includes adventure activities and pre-existing medical conditions. A family policy is also available.
- Happy Tails Pet Insurance: The policy offers comprehensive coverage due to injury and diseases, including special congenital & hereditary conditions, chemotherapy benefits of up to S$2,500 for dogs and S$1,500 for cats, and a third-party legal liability benefit caused by your pets. Besides, you can get a no-claims bonus on the premium of up to 15% on policy renewal.
- Domestic Helper Insurance: The Income policy offers expanded coverage, like personal accident coverage for a domestic helper of up to S$80,000, hospitalization, and wage compensation of up to S$35 for a maximum of 30 days of hospitalization. Besides, the insurance company pays the hospital authority directly for the insured. Other benefits include an offer of preferential rates for a domestic helper’s medical consultations and health screenings. Furthermore, the policy covers pre-existing conditions if a domestic helper has worked for more than 1 year.
- Motorcycle insurance: The Income motorcycle insurance policy covers expenses incurred from vehicle repairs, third-party property damage by accident up to S$500,000, and up to S$1,000 personal accident benefits due to accident. Orange Force of Income is a professional team established to assist drivers on the scene to handle matters caused by accidents. Besides, the insurance company awards up to 90,000 STAR*$ to motorcycle insurance buyers.
- Great savings on your purchases: You can save up to 21% on groceries and food at FairPrice Group and 22.78% on Caltex fuel expenses whenever spending with the Trust’s credit card.
- No additional fees: The Trust Bank does not collect cash advance fees, card replacement fees, and foreign transaction fees (including a 1% Visa charge,) making you spend charge-free. Besides, you can choose a repayment date for yourself.
- Credit card loans: You can get as low as a 3.4% p.a.(EIR 6.24% p.a.) loan interest from your credit card in as short as 60 seconds. The repayment period lasts from 3 to 60 months.
- Fees: The Trust credit card does not charge processing or hidden fees and early repayment fees after 90 days.
Which is Better: GXS or Trust?
Clients of GXS Bank can enjoy higher deposit interest income from its savings income without many strings attached, except that the funds should not be used for any kind of payments besides inter-account switches. Besides, the deposit cap and quota for each day are not without limitations and are subject to control by the management.
GXS offers lower loan interest expenses than Trust Bank. The bank, actively promoting spending programs within its groups, fits spen-for-reward customers. Lastly, lacking other financial offers like insurance and credit card services may make the bank less appealing to potential clients.
Trust Bank offers one-stop and comprehensive financial services, so clients will not look the other way. Yet, the deposit interest package may not be as competitive as GXS Bank due to 2 factors: a. Clients have to fulfill the required 4 levels to reach the highest rate. In contrast, GXS clients have only 2 levels of accounts; b. Lower deposit interest rates than GXS. However, the deposit base of S$125,000 is higher than GXS.
Besides, Trust Bank charges higher loan interest than GXS, making it hard to lure borrowers. An NTUC member-client can benefit from shopping and deposit benefits. Trust Bank fits NTUC members opting for all-round financial services.
Like traditional banks, deposits of digital banks, such as GXS and Trust Bank, are protected by the Singapore Deposit Insurance Corporation’s insurance scheme up to S$75,000. With the blooming of the industry, new entrants like the Mari Savings Account, offered by MariBank, make the sector more competitive and ultimately benefit clients.
- GXS offers lower loan interest and higher deposit income without too many restrictions and is fit for spend-for-reward customers. However, the deposit base and quota are limited.
- Trust offers more benefits to NTUC members opting for savings on shopping and all-round financial services.
- Both deposits of the 2 banks are protected by the SDIC’s insurance scheme up to S$75,000.
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