No profit, no problem: Singapore’s digital banks in 6 charts

It’s been just over two years since Green Link Digital Bank (GLDB) became the first digital bank to start operations in Singapore.

This was followed in quick succession by ANEXT, GXS Bank, and Trust Bank, with MariBank being the last to enter the game.

With at least a full year of operations under their belt – apart from MariBank – it’s a good time to evaluate how these digital banks are faring, with the caveat that they’re still in their infancy.

For comparison, we have included the performance of South Korea’s KakaoBank. Founded in 2016, the bank provides a benchmark as to how a successful digital bank in a developed market might perform over time.

It’s also worth noting that as digital wholesale banks, GLDB and ANEXT bank serve businesses exclusively, while GXS Bank, MariBank, and Trust Bank can serve both retail customers and businesses. Trust Bank, however, appears to be offering banking products to only consumers for now.

Combined revenue a fraction of KakaoBank’s

For 2023, the five Singapore-based digital banks recorded a combined total revenue of US$72 million, 6% of what KakaoBank achieved that year. Bear in mind, however, that the Singapore players are much newer, and the Singapore economy is around a quarter the size of South Korea’s.

Of the five, Trust Bank had the highest revenue, while GXS Bank suffered the biggest loss.

Unlike KakaoBank, none of Singapore’s digital banks are yet profitable. To achieve that, they will have to lower their cost-to-income ratio.

KakaoBank’s cost-to-income ratio of 53% in 2023 is in line what is considered “acceptable” for traditional retail banks, which typically have a ratio of around 50% to 60%.

Any figure above 100% indicates that the bank’s operating expenses exceed its operating income.

Loan way to go

The bread and butter of banking is taking in deposits from customers and using these deposits to extend loans. In order to run a profitable business, the interest charged on loans must be higher than the interest it pays on deposits.

Given their infancy and Singapore’s small market size, it’s no surprise that the Singapore players still have small deposit bases compared to KakaoBank. Of the five, Trust Bank has attracted the most deposits.

This might be expected since unlike the other banks, Trust was riding off Standard Chartered’s banking license and so was not subject to the initial S$50 million (US$37 million) deposit cap initially placed on GXS Bank and MariBank by the Monetary Authority of Singapore – this limit was raised in mid-2023.

GLDB and ANEXT, the digital wholesale banks which do not take deposits from retail consumers, placed fourth and fifth among the Singapore banks.

Similarly, when it comes to loans disbursed, Trust Bank comes out ahead, although it is the wholesale digital banks – ANEXT and GLDB – which take silver and bronze. This may partly be because they had a headstart on the others, launching their loan products in November and September 2022, respectively.

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