Eugina Sim will continue saving with a traditional lender, even though digital banks owned by technology players including Grab and Sea have opened up choices in Singapore for consumers like her.
“I don’t see why I need to shift my account,” the 27-year-old public relations consultant told Nikkei Asia. “People around me also, like my peers … I’ve not seen anyone use any of the three digital banks.”
Such lukewarm attitudes pose hurdles for the virtual lenders that have sprouted in the Southeast Asian financial hub in the wake of banking sector liberalization. In 2020, the Monetary Authority of Singapore issued licenses to allow non-lenders to operate financial services in the city-state without physical branches. These players have yet to become profitable businesses, however, as pressure mounts for expansion and growth in a highly competitive market.
GXS Bank, MariBank, and Trust Bank—the trio of so-called neobanks—together racked up SGD 358.75 million (USD 278.1 million) in losses in 2024, based on their latest financial statements, after launching two to three years ago.
In stark contrast, the three largest traditional Singaporean financial institutions—DBS Group Holdings, Oversea-Chinese Banking Corporation (OCBC), and United Overseas Bank (UOB)—booked a total of SGD 25 billion (USD 19.4 billion) in net profit for 2024, according to company disclosures, highlighting the gulf between legacy players and financial tech-based platforms. And while falling rates have squeezed earnings this year, these legacy banks remain profitable.
“There are only so many customers to win over, and traditional banks are rapidly matching digital features,” Jan Ondrus, a professor of information systems at ESSEC Business School Asia-Pacific, told Nikkei. “Most people might open an account for promotions, but convincing them to switch their salary account from DBS to a two-year-old digital bank is extremely difficult.”
Singapore’s neobanks touted relatively higher deposit returns over basic savings options at traditional banks, but as the interest rate environment came down from the highs of the past few years, such promotions became tougher to sustain. Banks across the board have cut rates for deposits.
“Profitability remains a challenge for these digital banks because they offer higher interest rates on deposits than their larger, traditional peers,” Eugene Tarzimanov, senior vice president at Moody’s Ratings, told Nikkei. “At the same time, their operating expenses are high because of ongoing scaling efforts, and their loan volumes are still low, limiting net interest and fee income.”
Also, legacy rivals have invested heavily to digitalize services, challenging virtual banks on their main turf. DBS announced in 2021, the year after the neobanks’ licenses were issued, that it would invest SGD 300 million (USD 232.6 million) the following year on upgrades to technology infrastructure and financial solutions. This represented a 14% year-on-year increase. OCBC and UOB have also been making tech investments.
In the face of stiff banking competition, the heads of GXS, MariBank, and Trust Bank told Nikkei in interviews that plans to grow their financial services are still afoot with the goal of making profits. However, only GXS was willing to project when it expects to break even.
The neobanks’ game plan is to identify gaps not well served by incumbent financial institutions and fill them. Digital players are also dipping toes into investment products as well as eyeing markets elsewhere in Southeast Asia to grow their reach.
“We believe that we can be the digital bank in Southeast Asia,” GXS CEO Pei-Si Lai told Nikkei. “We want to be able to do meaningful work, to be able to empower the communities that we serve.”
GXS is a joint venture between tech firm Grab, which holds a 60% stake, and mobile network operator Singapore Telecommunications (Singtel), which has the remaining 40%. It opened in its home market of Singapore in 2022, and launched a Malaysian unit late 2023.
In Indonesia, meanwhile, Grab and Singtel also have minority stakes in domestic lender Superbank. Earlier this year, it became an affiliate of GXS, which has helped build its infrastructure.
At the group level, neobank losses, which since 2023 have included the Malaysia operations, widened to SGD 214.3 million (USD 166.1 million) in 2024, from SGD 208.2 million (USD 161.4 million) a year earlier, its financial statement shows. Lai expects the business, which has close to 1,000 employees across the region, to break even by the fourth quarter of 2026 and be profitable in 2027.
Underscoring just how tough the Singapore banking environment is, GXS counts 200,000 users in a city with a population of around six million. Its younger Malaysian unit already has 1.2 million clients, Lai said.
More than 80% of GXS’s customers were already users of its parent companies Grab and Singtel, according to the CEO, underscoring just how important being able to tap an existing base of accounts is for digital banks.
Lai and MariBank CEO Natalia Goh both highlighted pockets of people they believe incumbent lenders do not serve well. These include those fresh in the workforce, freelancers, and gig workers.
The digital banking leaders see openings to court such customers. Both are welcoming those who do not have established credit histories and might thus be rejected by traditional banks for loans.
While risk profiles of such cases are typically higher, which is why traditional lenders tend to be reluctant to service them in the first place, GXS and MariBank say they lend smaller sums to these clients initially and monitor how loans are repaid before potentially extending credit lines to those deemed as underserved.
“Banking in Singapore actually is a very competitive space,” MariBank’s Goh told Nikkei. “We try and understand and address any gaps or opportunities in the market in terms of any underserved needs.”
None of the three banks were prepared to discuss their non-performing loan levels, although Trust Bank said “loan impairments remained well controlled.”
MariBank—owned by New York-listed Singapore tech player Sea, which also operates e-commerce platform Shopee—narrowed losses to SGD 51 million (USD 39.5 million) in 2024, from SGD 51.9 million (USD 40.2 million) the previous year, its financial statement shows.
Adopting a similar playbook to GXS, MariBank looked to Shopee users to accumulate a base of clients when it launched, although Goh could not confirm what proportion of its customers are derived from the e-commerce platform. She did not say when she expects the business to be profitable nor how many customers the neobank serves nor its staffing level. MariBank’s parent also owns SeaBank Philippines, a Philippine lender that came under MariBank’s management in April, extending its reach into another Southeast Asian market outside Singapore.
However, both Goh and Lai were conservative in describing plans for entering new regional markets, saying the priority is to grow their suite of financial services.
GXS and MariBank are branching into investment products like money market funds, which pool cash into short-term, lower-risk debt instruments that customers can park their savings in for potentially higher returns over deposit accounts. But whether such efforts can effectively buoy the digital banking model remains to be seen.
“Building pure digital banks in Singapore is still a new undertaking with a lot of operational details that the players need to figure out,” Jianggan Li, CEO of consultancy Momentum Works, told Nikkei. “Most people in Southeast Asia are spoilt for choice when it comes to choosing a digital bank.”
Trust Bank, Singapore’s third virtual lender, is backed by Standard Chartered and FairPrice Group, which runs a chain of supermarkets across the city-state. It has managed to narrow losses the most among the trio of digital financial services platforms. With 260 staff, it booked a loss of SGD 93.4 million (USD 72.4 million) in 2024, its income statement shows, down from SGD 128.4 million (USD 99.5 million) a year before. The neobank has appealed to cost-conscious consumers who like the prospect of cheaper groceries, leveraging its venture with FairPrice to offer savings when clients use its cards at the supermarkets.
In February, Trust Bank announced that it had a customer base of one million in Singapore. CEO Dwaipayan Sadhu said in an email to Nikkei that regular use of his company’s products such as credit and debit cards has driven “strong financial progress.”
He did not, however, give any guidance on when it will reach profitability.
“Our key challenge is to continue innovating in a competitive environment where customers have many choices,” Sadhu noted. “Our focus remains on creating meaningful, everyday engagement, giving customers compelling reasons to choose Trust.”
With the neobanks still going through lossmaking stints, a spokesperson from Singapore’s financial regulator told Nikkei that authorities have “no plans to issue additional licenses under the digital bank license framework.”
“The introduction of digital banks has added diversity to our banking system and provided consumers and businesses with more options,” the spokesperson said. “They are also expected to ensure that their risk management capabilities are commensurate with the complexity and scale of their operations, as they grow their business and customer base.”
None of the three banks named an institution abroad they are benchmarking themselves against, so only time will tell whether they succeed. But even existing users, like Singaporean entrepreneur Benson Han, are only lukewarm about them. Lured by attractive interest rates, Han, who already had accounts with DBS, UOB, and OCBC, signed up with Trust Bank and MariBank, but says his enthusiasm has waned.
“Actually, [the digital banks are] not much of a difference,” the 29-year-old told Nikkei. “I seldom use them.”
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.