Author: Daniel Tan
Written at: 17 Jul, 2023
Digital bank. Neobank. I'm sure recently, you have seen more and more of such terms with the decision by MAS to issue new digital banking licenses. But what is the difference between them?
Well, it depends on who you ask. Sometimes, even those within the same bank will use the terms interchangeably.
Most in banking would tell you digital banks or digital banking are simply the online services provided by banks whereas Neobanks tend to be banks that operate solely online without physical branches.
But with payment providers also offering banking accounts, the line is further blurred. A parallel example is looking at some of the new telcos in Singapore - where there are virtual carriers vs carriers. Generally, the former does not own the infrastructure and cell towers but it works with carriers to obtain bulk access to network services at wholesale rates. Then,it sets retail prices independently.
Similar to virtual carriers, some Neobanks may not possess all the infrastructure or license to offer the full range of banking services (such as checking and saving accounts, debit/credit cards, currency exchanges, and money transfers) and partner with banks to offer them instead. And depending on the scope of services, some may even need to partner with not just banks but also with payment processing networks like Visa and Mastercard, and remittances companies such as Nium.
Other times, it is simply a matter of branding strategy. Take, for example, UOB's TMRW App Vs Trustbank. For UOB, it is branded as an app. Whereas the latter is branded as a bank probably because it is a new entity owned by Standard Chartered Bank and Fairprice.
In summary, if we may quote Romeo and Juliet, "What's in a name? That which we call a rose by any other name would smell as sweet." Perhaps what we call them is not the important thing? And what is crucial is that we should always compare around for the sweetest offering as savvy consumers and that more competition is always good for us.
--
If you enjoyed this article, we’d love for you to share it with others who might find it valuable. Our goal is to bring you insights that Big Finance doesn't want you to know, but they often get overshadowed by Big Finance's content due to the large budget they have. Every share helps amplify our work and reach more readers like you!
Subscribe here for more! Give us a try — it’s free to get your personalized loan offers today!
Share on: