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The Future of Banking: Should I Open a Digital Bank Account?

In an era where technology is rapidly reshaping various industries, the banking sector is no exception. The rise of digital banks has been particularly prominent, challenging the traditional banking model and offering consumers a more convenient and accessible way to manage their finances. Singapore, known for its forward-thinking approach, has witnessed the emergence of several digital banks.

Read on to find out whether you should open a digital bank account in Singapore.

What’s the difference between traditional and digital banks?

Traditional banks have long been the backbone of the financial industry, offering stability, a physical presence, and a wide range of services. However, digital banks are disrupting this landscape by providing innovative, user-friendly platforms that operate exclusively online. While traditional banks may have a physical branch network, digital banks offer the advantage of 24/7 accessibility, streamlined processes, and often, lower fees.

In essence, digital banks provide the same suite of banking services as traditional banks but exclusively function online. This implies a lack of physical branches, requiring users to access all regular banking services solely through their smart devices or smartphones. Certain services, such as GIRO and cheque encashment, may be unavailable.

Nonetheless, digital banks come with advantages like doing away with bothersome fees, including fall-below fees or monthly charges. Furthermore, they frequently present appealing interest rates with minimal or no accompanying conditions, such as crediting a minimum salary.

Can I trust digital banks?

Since digital banks are a relatively new concept which lacks physical presence, you might be wondering how reliable they are.

In fact, many digital banks are subsidiaries of well-established traditional banks or have obtained licenses from regulatory authorities. This ensures they adhere to the same stringent standards. Digital banks hold full banking licenses, enabling them to cater to both individual and corporate clients by offering a range of services, including accounts, deposits, credit and debit cards, loans and more.

These digital banks benefit from the same deposit protection as traditional banks, falling under the purview of the Singapore Deposit Insurance Corporation’s (SDIC) Deposit Insurance (DI) Scheme. This scheme provides coverage for deposits up to S$75,000 in the event of the failure of any member bank or finance company.

To delve deeper into the evaluation criteria for digital full banks and digital wholesale banks, including business projections and capital requirements, the Monetary Authority of Singapore (MAS) provides a comprehensive list of FAQs.

In essence, the regulatory framework ensures that your funds are relatively secure with these digital banks.

What are the available options?

Singapore has welcomed the digital banking revolution, and among the options available are Trust, GXS, and MariBank.

Trust: A digital bank that prides itself on transparency and customer empowerment, Trust aims to provide a seamless banking experience. With a user-friendly interface and a commitment to ethical banking practices, Trust has gained popularity among tech-savvy consumers.

GXS: Founded by Singtel and Grab, GXS is positioned as a tech-driven financial institution and leverages cutting-edge technologies to offer efficient and personalised financial solutions. GXS has garnered attention for its innovative approach and commitment to leveraging technology for the benefit of its users.

MariBank: With a strong emphasis on sustainability and social responsibility, MariBank combines digital banking with a focus on environmental impact. Offering a range of services, MariBank appeals to individuals who prioritise eco-friendly banking practices.

How much interest can I earn?

 TrustGXSMariBank
Interest RatesBase interest: 1.5%

Bonus interest: 0.5% – 1%

Balance bonus rate: 0.5% (maintenance of S$100,000 Average Daily Balance) for the month is required, on deposit balance up to S$500,000)

Main account: 2.38%

Up to 8 different pockets (known as Savings Pocket) each: 2.68%

2.88%
Maximum DepositFirst S$500,000: Up to 1.5% p.a. OR 3% p.a. if you maintain min. S$100,000 Average Daily Balance, make at least 5 monthly card spends, and are a NTUC Union Member

Above S$500,000: 0.05% p.a.

S$75,000S$75,000
Eligibility18 years old and above

Singaporeans, Permanent Residents, Foreigners

At least 16 years old

Hold a valid visa

Possess a Singpass MyInfo account

Have a residential address in Singapore

18 years old and above

Singaporeans and Permanent Residents

 

Trust Bank might be familiar with many of us who frequent FairPrice Group. Beyond offering appealing interest rates on savings accounts with a larger deposit balance of S$125,000, Trust goes the extra mile by partnering with the NTUC Linkpoints Rewards system to help cut down on our everyday living expenses. Additionally, the current enticing sign-up deals could be a significant incentive for many to choose Trust over other digital banks.

On the other hand, GXS, following recent adjustments that saw a reduction in its promotional interest rate, now extends an interest rate of up to 2.68% p.a. for deposits up to S$75,000. To access this heightened interest rate, users need to create and deposit funds into their savings pockets, as the main account earns a slightly lower interest rate of 2.38% p.a.

Finally, MariBank boasts an attractive interest rate of 2.88% with a maximum deposit cap of S$75,000.

To open a digital bank account, or not?

Digital banks present a viable solution for individuals facing challenges in maintaining a consistent bank balance, allowing them to capitalise on monthly interest rates. For those who are unbanked or find it challenging to qualify for traditional savings accounts, digital banks serve as a lifesaver. They enable you to enjoy the benefits of banking to nurture your savings, responsibly leverage credit cards to maximise spending, and take advantage of various other available financial products.

Still, it’s advisable not to put all your eggs in one basket. If you already have an existing savings account with a traditional bank, we suggest considering digital banks’ savings accounts as a supplementary savings option to maximise your earned interest.

Read more: Getting Started With Fixed Deposits in Singapore: A Guide for Beginners

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