What Drives 53% of Singaporeans Away from Digital-Only Banking?

What Drives 53% of Singaporeans Away from Digital-Only Banking?

by February 23, 2024

A plethora of technological advancements and geopolitical events repeatedly upend the banking industry. 2023 was no exception, marked by highly publicised bank failures, rising interest rates, and various global economic challenges.

Amidst these upheavals, one constant emerged: People remain content with their banks.

In the fourth iteration of the EPAM 2024 Singapore Consumer Banking Report, 9,000 retail banking consumers across nine countries were surveyed, revealing consistent satisfaction across different demographics.

However, despite this satisfaction, Singaporeans exhibit caution towards remote banking, expressing discomfort with entirely digital banking providers.

Singaporeans’ banking preferences

Despite the global digital transformation sweeping the banking sector, Singaporean consumers strongly prefer traditional banking models.

Over half (53 percent) express discomfort with banking providers lacking local branches, while a similar proportion hesitates to engage with providers offering solely digital access.

The convergence of banking with social media for automatic financial transactions raises even greater concerns, with two-thirds of respondents expressing unease, underlining the enduring attachment to conventional banking practices.

Singapore Banking

The AI conundrum

While technology shapes modern banking, consumers exhibit mixed sentiments toward AI integration.

A quarter of Singaporeans report using AI-enabled tools for financial management, with high satisfaction rates. However, over half remain hesitant to act on AI-driven financial guidance, highlighting persistent skepticism.

Interestingly, 97 percent express satisfaction with the decisions made among those using AI-enabled tools. Despite this satisfaction, 51 percent of respondents remain uncomfortable acting on financial guidance recommended by AI services.

Comfortability with AI guidance varies by age, with 53 percent of those aged 18 to 34 expressing willingness compared to only 25 percent of those aged 55 and above.

Building trust amidst technological advancements

Consumer trust remains pivotal, with excellent customer service emerging as the primary reason for bank satisfaction.

Despite technological advancements, traditional banks retain consumer trust, possibly buoyed by regional bank failures.

However, consumers remain cautious about AI’s role in banking, emphasising the importance of transparent communication and regulation compliance.

According to the survey, 79 percent of respondents trust their banks to handle their finances, while 81 percent trust them to keep their data safe.

Meanwhile, 91 percent consider data safety the most important aspect of banking trust. This underscores the significance of robust data protection measures and transparent communication regarding AI integration and data usage.

Overcoming consumer hesitancy

As banks navigate the delicate balance between technological innovation and consumer trust, the emergence of Generative AI (GenAI) presents a promising avenue for personalised banking experiences.

Leveraging GenAI, banks can tailor communication and services to individual preferences, enhancing customer interactions and fostering deeper engagement.

While 68 percent of respondents globally express a desire for better financial education from their banks, only 21 percent report knowingly using AI-enabled tools for financial management.

Among those who trust their banks, 60 percent are willing to share their data, highlighting the potential for leveraging consumer trust to drive AI adoption and personalised experiences.

In Singapore, leading banks are pioneering the use of AI to enhance customer service and streamline operations. UOB Bank offers AI-driven solutions such as UOB Mighty, a mobile app providing personalized insights, and UOB BizSmart, automating SMEs’ business processes.

With its dedicated AI division, DBS Bank has developed over 600 AI models for services like wealth advisory and risk management. Tools like ADA and ALAN highlight DBS’s focus on using AI for data governance and model deployment, marking a significant move toward digital transformation in banking.

However, effective implementation hinges on transparent communication and compliance with regulatory frameworks, underscoring the importance of building consumer confidence in AI-driven banking solutions.

Incremental steps towards AI integration, optimisation of back-office processes, and improved frontline employee insights are crucial. Effective communication strategies must address consumer concerns and build trust in AI-driven services.

Instant Payments are a priority for consumers

The report reveals a strong consumer preference for instant payment capabilities. This indicates that most respondents view instant payment as a crucial service from their banks.

Specifically, 78 percent of those surveyed highlighted instant payments as the most essential feature their bank could provide them in the coming years.

Singapore Banking

This preference underscores the importance of immediacy in financial transactions, aligning with the broader shift towards real-time digital services across various sectors.

For Singapore, a global financial hub known for its technological innovation and robust financial services sector, the emphasis on instant payments aligns with broader trends towards digitalisation and fintech solutions.

Banks in Singapore increasingly invest in digital infrastructure to support instant payment systems, recognising their potential to enhance customer satisfaction, improve transaction efficiency, and foster greater financial inclusivity.

Leveraging trust for data collection and personalisation

High consumer trust allows banks to collect and leverage data responsibly. By understanding customer habits, preferences, and life events, banks can provide personalised experiences.

However, transparency, compliance with regulations, and data protection are paramount to maintaining trust.

In regions where legally feasible, banks can leverage social media and other sources to collect non-financial data, providing valuable insights into customer intentions and preferences.

Data collection and analysis enable banks to deliver timely and relevant services, enhancing customer experience.

Factors influencing banking decisions in Singapore

While overall satisfaction with banks remains high, many consumers contemplate changing their primary bank. Factors influencing this temptation include family or friends’ banking choices, access to local branches, brand recognition, benefits, and digital experience.

The younger demographics show a greater inclination toward switching banks. Of all respondents, 30 percent are considering changing their primary bank in the next 12 months.

Among dissatisfied respondents, 37 percent seek brand recognition, 22 percent value good benefits, and 21 percent prioritise a good digital experience.

Singapore Banking

Future outlook for Singapore banking

The EPAM report identifies significant areas for innovation and improvement that could shape the future of banking in Singapore.

The demand for instant payments and personalised financial advice, facilitated by AI and digital technologies, highlights the growing expectations of consumers for more responsive, intuitive, and customised banking services.

However, successfully integrating these technologies into the consumer banking experience hinges on overcoming existing scepticism towards digital banking solutions and AI-driven services.

To bridge this gap, banks are encouraged to leverage their established trust with customers, employing technological innovations not as replacements for human interactions but as enhancements to the personalised, human-centred banking experiences that customers value.

This approach requires a delicate balance between advancing digital transformation initiatives and maintaining the core principles of trust, transparency, and personal connection that define the traditional banking relationship.

Featured image credit: Edited from Freepik