Digital banks in Singapore 2024: Definition, how it works, examples

A decade ago, operating a business through a digital bank in Singapore was unthinkable. Traditional banks hadn't tailored their services to meet the specific requirements of Singapore SMEs, and many processes still required bank visits. 

Today, it’s the norm for many SMEs to run their financial operations entirely online.  That’s because digital banks and payment specialists like Airwallex are stepping up to meet the evolving needs of small businesses. These fintech innovations are more than digital versions of traditional banks; they’re financial platforms that help you streamline operations and enable expansion into overseas markets.

In this article, we’ll cover what digital banking is and what makes these challenger banks unique. We’ll also highlight the difference between digital banks and neo banks in Singapore, and how to choose one that suits your business ambitions.  

What is a digital bank? 

As the name suggests, digital banks offer personal and business banking services over a mobile app or website. Unlike traditional corporate banks, they have no physical branches, automated teller machines (ATMs), or cash deposit machines (CDMs).  

This means that routine banking tasks like transferring funds or managing payroll can be completed without the need to visit a physical branch. This level of convenience is especially critical for businesses that operate on tight schedules and need to manage transactions at any time. 

Digital banks offer financial services tailored to meet the needs of both individuals and businesses:

• Savings accounts. A universal feature of digital banks, savings accounts allow individuals to deposit money and earn interest over time. Funds can be withdrawn from a savings account at any time.

• Debit or credit card. Payment cards allow customers to make purchases, withdraw cash, and conduct online transactions directly from their accounts.

• Personal loans. Some digital banks offer personal loans to existing customers, which they can use for any purpose.

• Business account. These accounts are tailored to small businesses and facilitate business transactions, including payments, receivables, and payroll, all through a digital platform.

• Business loans. Business account holders can get access to fixed term loans or revolving credit for their operational needs.

• Fixed deposits. This is an attractive option for individuals and businesses looking to earn a higher return on their spare cash. 

How is a digital bank in Singapore different from traditional banks?

Although all traditional banks offer online banking and a wide range of business services, digital banks are inherently distinct. The focus on technology from digital banks makes banking on an app simple and straightforward. 

Here are a few key differences:

Source: Association of Banks in Singapore*, MAS**, MAS***

Why should SMEs and businesses care about digital banking?

Many business owners resist moving away from traditional banking practices. This hesitation can come from the learning curve associated with new technology and comfort with established banking relationships. However, today’s rapidly changing markets require businesses to move with maximum efficiency and flexibility. Digital banks provide near-instant access to bank accounts, loans, and other corporate services. By adopting these digital solutions, businesses can optimise their financial operations and make faster decisions, setting a solid foundation for growth and competitiveness on the global stage. 

The rise of digital banking in Singapore

In the past five years, widespread smartphone adoption, platform ecosystems, and the rise of e-commerce has driven demand for digital-first platforms.  Governments across Southeast Asia are now working on policies and frameworks to regulate the new banking landscape. Singapore, however, has been leading the way for digital banking regulations, fintech innovation, and talent development.

The Monetary Authority of Singapore (MAS) has been instrumental in fostering the growth of Singapore digital banking, with the introduction of digital banking licences on 28 June 2019. These licences opened up the banking industry to tech players, fostering competition and bringing fresh ideas to the financial sectors:

• The Digital Full Bank Licence allows an institution to offer both personal and business banking services, such as deposits, withdrawals, and personal loans. Their core feature is an interest-generating savings account.

• The Digital Wholesale Bank Licence can serve businesses only. Their core feature is a business account that lets you send or receive payments, often with multi-currency support. Other services include business loans, corporate cards, and revolving financing.

Digital banks vs neobanks: what’s the difference?

You may have come across the term "neobank" in conversations about fintech and wondered, “What is a neobank?”  Like digital banks, neobanks offer digital-first financial services and are regulated by the MAS. However, they are different in several ways:

Source: Deloitte**, MAS***

• Licensing. In Singapore, companies that specialise in payments are licensed by the MAS as a major payment institution, which means they can facilitate monthly transactions larger than SGD 3 million for any payment service. MAS regulations concerning transfer limits, the safeguarding of customer funds, and the protection of customer data must be followed.

• Financial services. Financial technology companies provide specialised payment services, such as money transfers and currency conversions. Unlike digital banks, however, they cannot provide loans, credit facilities, or investment products.

• Digital business solutions. Some financial technology companies have also innovated on time-saving features like batch transfers and automated reconciliation. These business solutions simplify financial operations for SMEs, helping them operate more effectively on a global scale.

Digital banks in Singapore

As of February 2024, there are 5 licensed institutions offering digital banking services in Singapore. Here’s a brief look at each one:

Sources: Trust Bank, GXS Save, Mari Bank, ANEXT Fixed Deposit, GLDB Rates as of 5 February 2024

Trust Bank

Trust Bank serves retail customers with features that help with everyday savings. Its main product is a savings account with an interest rate of 1.5% - 3% p.a, and a credit card that offers savings on groceries and petrol (i.e. up to 21% savings at Fairprice and up to 22.78% savings at Caltex).

GXS Bank

GXS Bank in Singapore offers banking solutions for gig economy workers and students. Their Savings Pockets feature works like a mini fixed deposit, with the potential to earn a higher interest rate of up to 2.68% p.a., accrued daily. 

MariBank

MariBank is Sea Group’s digital bank in Singapore. They offer banking solutions for retail consumers and SMEs

For Shopee sellers, MariBank will automatically add the Mari Business Account as your Shopee Shop’s Linked Payment Method. This facilitates smoother financial tracking for Shopee businesses and reduces the hassle of manual withdrawals.

ANEXT Bank

ANT Group’s ANEXT Bank provides digital financial solutions for Singapore SMEs. Central to its offerings is the Business Account, which allows SMEs to deposit funds and make transactions.

ANEXT Bank expands its support for SMEs with business loans of up to SGD 300,000. They offer two payment methods - a traditional instalment plan, and a “pay per use” plan.

Green Link Digital Bank

Green Link Digital Bank (GLDB) serves SMEs with loans, revolving financing, and supply chain financing. 

On top of overdraft loans and term loans, GLDB also offers a payables and receivables financing service. This service allows companies to finance their outstanding invoices or extend payment terms with suppliers.

Airwallex

Although Airwallex is not a digital bank, it stands out as an excellent option for SMEs.

The Airwallex Business Account simplifies international transactions and provides SMEs with tools to manage multiple currencies, send overseas payments, and mitigate foreign exchange risk. This is particularly valuable for SMEs who need to pay overseas suppliers, are operating in multiple markets, or want to expand to overseas markets.

Unlike digital banks, Airwallex has a wide transfer network with local payment rails in 110+ countries. Your overseas payments in foreign currencies are treated like local transfers, which means you pay no international transfer fees and funds arrive as quickly as 1 business day.

On top of this, Airwallex is an all-in-one business account with features like batch transfers, expense management, and Xero integration for simplified bookkeeping and financial operations. You can also issue free unlimited Borderless Cards, a corporate debit card powered by Visa that earns 1% unlimited cashback on all business expenses.

An Airwallex business account is free to open and has no initial deposit, fall-below fees, or monthly and annual fees. Here’s how we keep our customer funds safe.

Benefits of using a digital bank 

Digital banking can enhance the way individuals and businesses manage their finances:

• 24/7 access. Digital banks provide round-the-clock access to banking services through mobile apps and websites. 

• Reduced fees. With reduced or no fees for basic banking services such as account maintenance and international transactions, this cost efficiency can translate into significant savings over time.

• Personalised services. Through AI and data analytics, digital banking can recommend the right products and services tailored to your spending habits.   

• User-friendly interface. The focus on technology makes banking on an app simple. Features like instant notifications, one-click transactions, and budgeting tools improve the overall user experience, making finance management a seamless part of daily life.

Risks and disadvantages of digital banking for SMEs

While digital banking brings clear advantages, it also comes with its set of challenges:

Security

Digital banks are an obvious target for cyberattacks, potentially putting users' financial data at risk. The rise of phishing scams also makes consumers vulnerable to expert manipulators who can trick them into revealing banking details.

Singapore banks proactively address these security challenges through advanced security measures like two-factor authentication, encryption, and real-time fraud protection. Additionally, banks have launched extensive public education campaigns to raise awareness about scams and how customers can protect themselves.

Dependence on technology and internet connectivity

Reliable online access is essential for digital banking. In areas with unstable internet connections or during instances of technological failure, customers may be unable to execute critical financial transactions.

Singapore banks mitigate these issues by building robust digital infrastructure that can handle high traffic volumes, and implementing backup systems to ensure minimal disruption during outages.

Building trust

Given the absence of physical branches, digital banks often struggle to build the same level of trust as traditional banks. Customers value human interactions and the reassurance it brings, especially when they’re unfamiliar with the bank.

Financial technology companies are addressing these concerns by integrating human elements into their digital services. For instance, all Airwallex customers can benefit from a local support team who you can reach through email, chat, or phone should any questions arise. By offering direct, human contact, Airwallex fosters strong relationships that transcend the impersonal nature of digital banking.

Should you consider opening a digital bank account for your business? 

If your business values flexibility, efficiency, and modern financial management, then a digital bank account could be a smart move. Here’s what you should look at as you explore banking partners:

• Service offerings. Think about what your business needs right now. Do you require access to capital in multiple markets, and a trusted global presence? If so, you’re better off with traditional banks. However, if you value efficiency and innovation, digital banks and specialised financial technology companies may be right for you. Financial technology companies, in particular, have specialised services that even digital banks can’t offer. For example, Airwallex has the technology and global transfer network to facilitate fast overseas transfers, without hidden fees. It allows you to create local currency accounts, so you can receive and hold different currencies without unnecessary conversion fees. If this kind of speed, efficiency, and scale is what your business needs, it may be worth exploring alternative fintech solutions. Airwallex (Singapore) Pte. Ltd. (‘Airwallex SG’), is also licensed as a Major Payment Institution regulated by the Monetary Authority of Singapore (MAS).

• Fees. Even though digital banks have cost advantages compared to traditional banks, examine the fees for banking activities that you frequently do. Choose the financial partner that offers the best fees.

• Security. A trustworthy digital bank should offer multi-layered security features. On top of two-factor authentication (2FA), look out for real-time transaction alerts so you can catch unauthorised use quickly, and data encryption. 

• Reviews and case studies. Reading consumer reviews is smart due diligence, while case studies illustrate real-world applications of their services.

Why you should consider a financial technology service provider like Airwallex 

While Airwallex is not a digital bank, we are a MAS-licensed payment institution that partners with local payment rails in different countries and economic territories. This gives us the ability to offer free overseas transfers in local currencies. Money sent from your Global Account is processed through local payment rails, which lets you bypass the SWIFT network and avoid SWIFT fees. 

This also means faster transactions and lower fees. Airwallex enables fast cross-border payments, with 70% of transfers arriving as fast as a few hours or 1 business day. 

3 easy steps to opening an Airwallex Business Account

Ready to start digital banking? Creating an Airwallex account is easy and fast - here’s how:

• Step 1: Create a free Airwallex Business Account

• Step 2: Verify your business by uploading documents online

• Step 3: Start using your account in 1-3 business days!

Conclusion

It is understandable that some SMEs may hesitate to make the switch to digital-only banking, given the comfort and familiarity of traditional banking. However, it’s clear that digital business accounts offer compelling advantages. From the flexibility of managing finances on-the-go, to automating repetitive financial tasks, digital banks help businesses thrive in today’s fast-paced business landscape.

Choosing the right digital bank requires a thoughtful approach that starts with understanding your business needs. The key lies in selecting a partner that not only supports your present-day operations, but that can grow with your business.  After all, the real benefit of digital banking lies beyond financial management - it enables you to grab new opportunities for innovation and expansion.

The rise of Singapore’s digital banking landscape is an evolution towards a more dynamic and SME-friendly environment. For businesses ready to take the leap, the future of banking promises more than convenience - it positions them for success in a rapidly evolving digital world.

Frequently asked questions

1. How safe are digital banks?

Digital banks and financial technology institutions in Singapore are held to the same rigorous safety and regulatory standards as traditional banks. Licensed by the Monetary Authority of Singapore (MAS), these banks employ industry-standard security features like encryption and real-time fraud monitoring. The commitment to cybersecurity and compliance means your money and data are well protected. Using a digital bank in Singapore is as safe as it gets, giving you peace of mind in your financial transactions.

2. What are the regulatory requirements and safeguards for digital banks in Singapore?

Digital banks are licensed by the Monetary Authority of Singapore (MAS) under a comprehensive framework designed for financial stability and consumer protection. There are two main types of licences: a digital full bank (DFB) licence, which allows banks to offer financial services to both retail and business customers, and a digital wholesale bank (DWB) licence, aimed at businesses. 

Financial technology companies such as Airwallex are also licensed by the MAS as a Major Payment Institution which allows them to handle monthly transactions exceeding SGD 3 million for various payment services. Additionally, they are required to adhere to MAS guidelines on transfer limits, secure customer funds, and protect personal data.

To get licenced, these service providers must meet stringent criteria for business viability, tech infrastructure, and security measures. This rigorous process ensures that fintech companies can operate securely and contribute to Singapore’s innovative banking landscape.

3. Which digital bank offers the best interest rates, fees, and features for your business needs?

Finding a digital bank with the best interest rates, fees, and features for your business needs requires some research, as these can vary and are subject to change. Each bank has its own set of perks, from competitive interest rates to low fees and a suite of digital tools tailored to help your business grow. 

You need to compare the most recent offerings, read the fine print, and consider how each bank's services align with your business’s needs.  

4. How can you access and manage your digital bank account online or via mobile app?

Managing your digital business bank account is straightforward. First, download their app or head to their website. Log in with your business account details to access a dashboard, where you can perform various banking tasks like viewing balances, making transfers, handling invoices, and preparing payroll.

5. Do digital banks offer business loans, payments, transfers, investments, etc.?

Yes - Digital Full Banks and Digital Wholesale Banks can offer business loans and other financial services for businesses.

6. How can you integrate your digital bank account with your accounting, invoicing, and other business software?

Integrating your digital bank account with your business software starts with choosing an institution that supports the right integrations. Instead of digital banks, many financial technology companies offer Application Programming Interface (APIs) that connect your banking data with software like Xero. This automates your financial processes and gives you a holistic view of your finances. 

To set this up, navigate to the integration settings within your financial technology provider's platform, select the software you use, and follow the prompts to link your accounts.  

This publication does not constitute legal, tax, or professional advice from Airwallex nor substitute seeking such advice, and makes no express or implied representations / warranties / guarantees regarding content accuracy, completeness, or currency.