_____________________________________________________________________________________________

Asia Retail Banking Practice

Retail Banking in Singapore:

Competitive Landscape,
Opportunities & Trends
Last Updated: May 2014

Copyright 2014: MILSTE Group Limited

Table of Contents
1.
2.
3.
4.
5.
6.

Forward and Introduction 3

MILSTEs Methodology 4
The Role of Branches: The Competitive Environment, Opportunities, Trends 5-7
The ATM Market in Singapore: The Battle for Access to Clients 8
Mobile Banking: Leaders in the Market and Clients Preferences 9-10
Credit Cards: The next Generational Customer, the Use of Credit Cards and
Strategies of Singaporean Banks 11-13
7. Retail Lending Market Share in Singapore and Strategies of Major Players 14-15
8. Debit Cards in Singapore: The Competition for More Wallet Share 16
9. Mortgages: Competitive Landscape & Market Share 17
10. Overall Competition of Banks in Singapores Retail Market: SWOT Analysis 1829
a. DBS
b. OCBC
c. UOB
d. Citibank
11. How to Leverage MILSTE for Banks and Technology Vendors 30-31

Forward and Introduction

MILSTEs Retail Banking in Singapore: Competitive Landscape, Opportunities &
Trends report is the result of an extensive project completed by MILSTEs teams in
Beijing and Hong Kong over a three-month period in 2014.
This report attempts to calculate the number of credit cards in the market, the number
of debit cards, the number of ATMs, retail bank lending, and more importantly, it
looks deeply into the strategies of the banks in all the aspects mentioned. Not only do
we provide the data, but our analysts also provide a sharp analysis that creates a story
around the numbers. MILSTEs reports give life to the data.
In this report you will find opportunities in the most current data we have gathered,
understand competitive threats with our detailed market analyses, and plan your
corporate strategy with our expert qualitative evaluations and growth projections.
This report will give the reader strategic intelligence about the most competitive
players in Singapores retail banking industry. It will also allow the reader to fully
understand key industry trends, opportunities, and problems within Singapores retail
banking sector.
We are proud to use a minimalist style in our reports in which we present only data
and analyses that are directly related to the topic at hand. We keep pointless pictures
and graphics out of all of our reports to ensure that you are not distracted from the
analyses and data that we present in our intelligence.
Thank you for working with MILSTE. If you have any other needs or comments,
please do not hesitate to contact my staff or me.
With great respect,

Baron Laudermilk
Managing Director
MILSTE

MILSTEs Methodology
MILSTE utilizes a simple yet proven methodology to ensure the accuracy of our
reports. We use primary sources to acquire the intelligence we need, including
interviews, surveys and conversations.
Regarding MILSTEs Retail Banking in Singapore: Competitive Landscape,
Opportunities & Trends report, the information comes from two surveys, (One
towards financial institutions and another towards consumers) and conversations with
regulators in the Monetary Authority of Singapore (MAS). The research was
conducted in 2014. The two surveys are broken down as the following:
Survey 1: Interview Singapores financial institutions
Interviewed decision makers and managers in eight different banks in
Singapore, including the following:
o OCBC
o UOB
o Citibank
o Standard Chartered
o HSBC
Five managers in trust companies in Singapore completed the same
survey.
Survey 2: Surveyed 100 clients and 10 HNWIs in Singapore
The survey asked about their investment preferences onshore and
offshore, the products they are seeking, and how they view different
banks, and their attitudes and purchases of specific financial
instruments.
Our team of researchers also gathered information from discrete conversations with
regulators about Singapores retail banking industry, and we have also added in
desktop research with our analyses to ensure that this report is a comprehensive
overview of Singapores retail banking sector.
MILSTEs intelligence and analyses are conducted independently of outside influence
with the findings based on a quantitative context through the interpretive views of
trained analysts. These analysts are held to the highest standards and are bound to our
Promise of Integrity. Our success is evidenced by our results.

The Role of Branches: The Competitive Environment, Opportunities, and

Trends

A branch is the main part of a banks retail banking business. It is still one of the main
contact points for customers with banks in Singapore. With the continuous
development of domestic retail banking and the increasing customer demands on
branches, Singaporean banks are transforming their branches from traditional
branches to innovative, low cost and highly social branches. Many banks in
Singapore, including the foreign banks, are giving new reasons for clients to come
into the branches to do banking by providing a high tech atmosphere that welcomes
clients, excellent customer service, and using technology to mitigate the length of
lines and to better understand their customer needs. We are seeing Singaporean banks
comprehensively upgrading their branches to use a fully "customer-centered"
approach, in order to enhance the performance of their retail business, improve
customer satisfaction, lower operation costs and increase efficiency.
The Singaporean retail branch transformation is a deep-seated revolution of the
branch network based on the bank's overall development strategy, from the view of
customer segmentation and target customer positioning. In the process of
transformation, Singaporean banks are going to need to continue to design the entire
branch transformation blueprint, identify the breakthrough point, develop a
collaborative roadmap, and implement the transformation step by step through pilots
and promotions. The roadmap for many of these banks, including DBS, UOB and
OCBC have been in the works for years, and each of them, along with their main
foreign competitors, Standard Chartered and Citibank, will continue to find ways to
bring relevance to their branches as digitalization slowly makes branches less and less
relevant to the mobile banking customer.
FIGURE 1: Singaporean Banks Branches Becoming The Right Size

Tailored Footprint

Have Various
Branch Formats

Boost Sales Via

Technology

Add the Human

Touch to Banking

Gain an
Understanding of
Their Clients With
Analytics

Source: MILSTE

OCBC has continued to enhance the design and layout of its branches to improve
customer experience and to compete with its main competitors, DBS and UOB, who
are also finding ways to improve their customers experience. The bank introduced an
SMS queue alert service to reduce queue time for customers by around 30% by using
mobile technology that is connected directly to all of its branches. The bank expanded
its regional network of Premier Centers from 45 to 58, and it refurbished key
locations by upgrading facilities so that customer events and seminars can be held inhouse.
OCBC has been going back to the basics in improving its retail banking operations.
At the banks branches, they raised the bar in customer experience through initiatives
such as service audits, and ensuring that they hire people with the right attributes by
screening them with online testing that tests personalities and finds employees that are
more sympathetic and caring, and that are social and enjoy speaking with new people
and helping them.
DBS, the leader in branch transformation in Singapore, has been optimizing big data
and using analytic tools to improve its customer experience, and creating innovative
and relaxing branches that quickly serve their customers while at the same time
upselling them to increase revenue. In previous years, the bank has successfully cut
queue times at their branches, enhanced the look and feel of their branches to attract
younger people, and have brought in Ipads and other social gadgets to interact with
clients while they wait for service. In 2013, the banks distribution channels were
expanded by a partnership with 7-Eleven, a convenience store chain, to enable their
customers to withdraw cash from its 500 outlets across Singapore. This built on the
partnership with SingPost that was launched in 2012, which enabled their customers
to carry out basic banking transactions at 56 post offices in Singapore. Furthermore,
the bank improved the customer on-boarding experience with a simplified
documentation process. The account opening documents were awarded the Crystal
Mark for being written in plain English. DBS launched an online appointment system
so that waiting times can be reduced when customers visit a branch to complete their
account opening.

Citibank and Standard Chartered have both been investing in their branches to ensure
that they continue to keep up with the likes of DBS. Citibank has opened something
called a Smart branch. It uses digital technology including display panels forming
media walls, interactive touch-screens, face-to-face phone banking and videoconferencing facilities for interactions with banking specialists. In addition, the
branch provides for other innovations including a cheque-deposit machine with
imaging technology, iPads carried by in-branch staff and a workbench with Apple
terminals for account openings and other services. The design of the branch, which
sets the tone for all of Citibanks new branches going forward, is premised upon
putting the customer in control by streamlining the customers interaction with the
bank and maximizing their banking experience. The branch is equipped with enabling
tools that put information at the fingertips of customers and harnesses cutting-edge
technology to provide a paperless and straight-through process for account openings.
Designed around the customers needs, the branch promotes customer engagement at
all levels. Banks in Singapore will continue to make their branches more optimal,
social and customer centric to meet the rising demand of customers and to ensure that
their branches are in sync with their internet, mobile and social platforms.

FIGURE 2: Total Retail Branches in Singapore 2011-2012

500
450

436

428

Total branches

400
350
300
250
200
150
100
50
0
2011
Others UOB OCBC DBS

2012

Source: MILSTE

The ATM Market in Singapore: The Battle for Access to Clients

The ATM market in Singapore has been, is and will continue to be highly competitive as
banks continue to develop their ATMs to make them more user friendly and easier for
consumers to access. The biggest players in Singapores ATM market, DBS, OCBC and
UOB. DBS bank has dominated the ATM market for more than 4 years according to our
data, as it continues to maintain its lead within the market. But DBS faces major
challenges in the market by OCBC bank, which has been aggressively expanding its
ATM network across Singapore in order to take the number one spot. Banks have
mentioned that the ATM market is the second most important area for competition in
Singapore, right behind mobile and online banking. Many younger consumers avoid
branches as they have lines, so they use online banking or access nearby ATMs. The
competition in ATMs in Singapore will continue to be strong in the next few years as
foreign banks, including Citibank, HSBC and Standard Chartered continue to also expand
their market share in Singapore.

FIGURE 3: Total Number of ATMs in Singapore from 2011-2012

3,000

2,759

2,657
Total ATMs

2,500
2,000
1,500
1,000
500
0
2011

Others UOB OCBC DBS

2012

Source: MILSTE

Mobile Banking: Leaders in the Market and Clients Preferences

As the majority of Singaporeans have smart phones, such as an android or Iphone,

banks have been spending a lot of resources and time to develop their mobile
platforms, which have become one of the most advanced in Asia similar to that of
South Korea and Hong Kong.
With consumer transactions rapidly shifting online, banks continue to enhance their
Internet and mobile platforms to make them seamless extensions of their physical
branch footprint. The revamp incorporates an improved engine to pull together
customer and product information, a refreshed and consistent look and feel for all our
online and mobile channels, and the introduction of innovative applications. Once the
full revamp is completed, Internet and mobile platforms will be simpler and more
intuitive to use, offer a higher degree of customization to individual needs, and enable
customers to interact in real time with relationship managers or branch staff.
Customers will be able to make everyday transactions such as payments, receive
assistance for making investment decisions, call up information on lifestyle activities
such as dining and shopping, and check on their bank accounts all at their
convenience, 24/7.
FIGURE 4: Singapore Banks Path to a Digital Bank

Increase
Penetration
Make
Information
Easy to
Access

Add Lifestyle
Applications
to Banking
Platform

A
Digital
Bank
Source: MILSTE
Increasing demand from customers for mobile banking is prompting DBS Bank to
invest heavily in this area in the coming years. Singapore's largest consumer bank
revealed that nearly a quarter of its customers use its mobile apps, five years after it
began rolling out such applications. Out of more than four million customers, over
839,000 are registered users of its mobile apps, while over two million prefer to go
online and access the bank's website. Of these, a significant portion are heavy users.

About 350,000 customers log in daily to the website via both mobile and online
platforms. The bank announced last month that it would be investing $200 million in
digital banking over the next three years.
Transactions increased 33% since its launch in 2011. According to data released by
the bank, United Overseas Bank customers are conducting more than one million
mobile-based transactions every month. Monthly transactions using UOB Mobile
reached a high of 1.1 million in December 2012, an increase of 33 per cent since its
launch in December 2011. UOB Mobile customers are using the app most often to
check their account, transfer funds and to make bill payments. The Mobile Cash
feature, an industry first, provides customers with the ability to make cash
withdrawals and transfer funds to others with just an instant text message and a onetime password at more than 600 UOB ATMs in Singapore.

10

165%

155%

145%

Mobile subscribers
as % of population

Total mobile phone

subscribers (Million)

FIGURE 5: Total Number of Mobile Subscribers in Singapore from 2010-2014e

135%

125%

115%

105%

3
2

95%

85%

75%
2010

2011

2012

Total mobile phones subscribers

2013e

2014f

Mobile subscribers as % of population

Source: MILSTE

10

Credit Cards: The next Generational Customer, the Use of Credit Cards and
Strategies of Singaporean Banks

With over 5 million credit cards in circulation, credit card issuers in Singapore need to
understand the different customer segments. Total unsecured loans in Singapore,
comprising credit card rollover balances and personal loans, grew by 9%. Credit card
spending increased by 14% while income from payment terminals at merchant outlets
grew over 90% since 2013 according to our data. This demonstrates the major
competition for more credit card market share in Singapores fragmented credit card
market.
Banks in Singapore are some of the most advanced in the world when it comes to
credit card strategies, marketing them, and adding benefits and gift schemes to them
to maintain clients and attract new ones. The leaders in Singapores credit card market
are UOB, OCBC, and DBS bank, each owning almost a 25% of the countrys market
share.

12.0

14.0%

10.0

12.0%
10.0%

8.0

8.0%

6.0

6.0%

4.0

4.0%

2.0

Credit cards in force,

annual % change

Number of credit cards in force (millions)

FIGURE 6: Credit Cards in Force in Singapore from 2010-2014e

2.0%

0.0

0.0%
2010

2011

2012

Millions

2013e

2014f

% change

Source: MILSTE

In 2013, OCBC bank implemented a consolidated card application processing system

across Singapore and Malaysia that reduced the unit processing time for credit card
applications by around 75%. Also in November 2013, credit cards were re-launched
with new features. In particular, the unprecedented 0.5% to 1.2% rebate on all retail
purchases with no maximum rebate limit and the automatic triggering of
installment payment plans for large ticket purchases, have been well received by
customers. Due to the banks initiatives in credit cards, from 2012 to 2013 the bank
has increased its credit card non-interest income by 28%, one of the highest.

11

Although Citibank is not in the top three credit card issuers in Singapore, it is one of
the most innovative, and it has increased its market share significantly in the last few
years with its innovative credit cards. Citibank was the first bank in Singapore to
launch a card that integrates social networking. The Citibank Clear Platinum Card
leverages on the voice of the consumer in social media, allowing its card members to
customize their card experience, be part of a virtual community that rewards them for
their social activities, and enjoy accelerated 5X rewards points for shopping online.
FIGURE 7: Credit Card Market Share by Bank in 2013 in Singapore
DBS

OCBC

UOB

Others

19%
30%

21%

UOB

Source: MILSTE

Banks in Singapore private banking arms are also using special customer centric
credit cards to cater to their clients. Instead of plastic, these special cards are crafted
out of titanium, steel or metal membrane, with the ultra wealthy in mind. Besides
having dedicated relationship managers who can help tailor memorable and unique
lifestyle experiences, these super card holders are also pampered with complimentary
first or business class airline tickets, and complimentary golfing privileges, to name a
few. Besides a whole host of luxury privileges spanning from travel, fine dining to
exclusive events, one can even pay for an expensive car with the Centurion card.
Citibank's Ultima Card, which is a credit card launched in 2003 and then revamped in
2010, is only offered to clients with minimum investible assets of more than S$5
million or income of more than S$1 million A large portion of these card-members
are Singaporeans, although there has also been a growing number of expatriates from
Indonesia, China and Taiwan. In the last two years, there has been double-digit
growth in net client growth.

12

FIGURE 8: Singapores Next Generation Credit Cards

Powerful
Marketing
Strategies of
Credit Cards
Loyalty
Programs

Using analytics to understand the exact

kind of card that their clients need

Creating a back-end infrastructure that

makes it easy to use credit or debit cards
in conjunction with other systems

Source: MILSTE

13

Retail Lending Market Share in Singapore and Strategies of Major

Players
People are borrowing more
Total gross lending showed healthy growth throughout 2013 in Singapore. In 2013
Singaporean consumers continued to borrow to finance their daily spending and used
credit cards to enjoy discounts and promotions offered by the card issuers. Borrowing
for overdrafts without the need of collateral remained popular, as small borrowers are
free to use the loan for their own purposes, while small and short-term borrowers
approached banks for easy access to consumer loans.
Government property cooling measures
With property prices increasing sharply during the review period, the Singaporean
government put several measures in place over the review period. With the newer
cooling measures in 2013, the lowering of loan-to value ratio for mortgages/housing
loans and auto loans were effective in controlling the demand for property and
vehicles. The restrictions on new, unsecured loans announced by the government will
also deter some credit card spenders who rely on revolving credit line.
Banks and consumers becoming more careful
While the government announced cooling measures to prevent any bubble from
forming in the economy, both banks and borrowers were also becoming more
cautious about further increases in the interest rate. As property prices increased
strongly during the review period, many investment experts suggested that it would be
difficult to earn a profit by investing in property at such high prices. Banks also
became more careful in offering loans to consumers and ensuring they were not overborrowing.
Local banks losing edge in retail lending
The three main local banks, DBS Group Holdings Ltd, United Overseas Bank Ltd and
OCBC Group, were the leading lenders in Singapore in 2013. As foreign banks offer
more competitive borrowing rates, many borrowers are turning to them for better
offers. The foreign banks were also aggressive in attracting high net worth customers
and offered special rates for these premier customers. Apart from the mainstream
financial service providers, pawn shops also became more popular during the review
period, especially for lower income earners with quick approval of loans based on
their own collateral such as jewelry or watches.

14

Consumer lending expected to slow down in the forecast period

Consumer lending is expected to grow more slowly in the forecast period due to the
many cooling measures in place in 2013. Many investors are also careful about the
tapering effect of US Federal policies, which might force up interest rates. As
consumers enjoyed low interest rates in the review period, many will not be able to
afford the increase in interest rates if this were to happen. Consumers will learn to
spend within their means and have better financial planning. Nevertheless, it is good
that the government restricted the total debt-servicing ratio in 2013 in preparation for
such an event in the forecast period. If consumers find it too difficult to apply for
unsecured loans from financial institutions, they are more likely to approach the
pawnshops and use their own collateral for rapid turnover.
FIGURE 9: Total Retail Lending in Singapore from 2010-2014e

Total retail loans

(bn Local Currency)

300

283
242

250

207
200
150

180
152

100
50
0
2010
Others

2011

2012

Unsecured Consumer lending

2013e
Credit cards

2014e
Mortgage

Source: MILSTE

15

Debit Cards in Singapore: The Competition for More Wallet Share

Most recently, UOB helped small business customers in Singapore manage rising
costs with the UOB Business Debit card, offering cost-saving discounts on utilities
and transportation expenses. Partnerships factor significantly in UOBs business and
they continue to build alliances with the biggest names in business. In Singapore,
UOB reached an agreement to launch a co-brand card with the Dairy Farm Group,
which operates more than 270 retail outlets nationally. In Indonesia, UOB ran a
yearlong campaign with Garuda Airlines and The Food Hall, a gourmet supermarket
franchise, for the benefit of UOB Card members.
FIGURE 10: Debit Cards in Force from 2010-2014e in Singapore

Debit cards in force (m)

10%

11.8
11.6
11.4
11.2

5%

11.0
10.8
10.6
10.4

Debit cards in force, annual % change

12.0

0%
2010

2011

2012
millions

2013e

2014e

% change

Source: MILSTE

16

Mortgages: Competitive Landscape & Market Share

The mortgage playing field in Singapore is dominated by the countrys big banks, and
they have been gaining market share and expanding their mortgage business in
Singapore rapidly as immigrants to the country are reaching an income level to
acquire a home. Despite the governments campaign to curb housing prices and the
idea floating around of a property bubble, banks are still pushing their mortgage
business in Singapore. DBS and UOB lead the market with each more than S$46
billion in outstanding mortgages, and OCBC falls right behind them with around S$38
billion. Other major banks and foreign banks, such as Citibank and Standard
Chartered, have increased their market share in recent years in mortgages, but they
have mainly been focusing on other fee-based incomes, such as credit cards, debit
cards, wealth management and private banking, which has thus left them behind the
big banks that have been centering much more attention on the countrys mortgage
market.
FIGURE 11: Mortgages from Key Banks in Singapore 2011-2012 in Singapore

50
45

46

46

41

40
Outstanding mortgages
(bn, Local Currency)

41

38

35

32

30
23

25
20

17

15
10
5
0
DBS

OCBC

UOB

2011

Others

2012

Source:
OCBCs outstanding mortgages from 2011 ($32billion) to 2012 ($41 billion) have
seen major growth in its mortgages and are attempting to catch up with DBS and
UOB in the next few years. But the banks strategy in mortgages is different than
OCBC and DBS. UOB is taking a more cautious and calculated step when it acquires
its mortgage clients. The bank has instead been creating a strong credit risk platform
to ensure that its non-performing loans stay down and that it keeps profitability high.
But domestic banks have become weary of loans in Singapore due to the repricing. By
the end of 2013, Mortgages were 23-24% of gross loans.

17

Overall Competition of Banks in Singapores Retail Market: SWOT

Analysis
Banks in Singapore have become highly competitive and are using technology to gain
an edge in the market, especially in redesigning their branches, making their mobile
banking platform more customer centric, and building new technologies internally to
become more effective in serving their customers.
A variety of surveys including our own have shown that customers most common
interaction is through ATMs, followed by online banking. Besides getting cash,
customers can also pay bills, parking fines and carry out other third-party transactions
through ATMs. When it comes to loyalty, online transactions and online sales or
service are most likely to result in recommendations. Visits from a banker and ATM
usage also have a strong positive inuence.
Although Singaporean banks have been significantly investing in their mobile
banking systems, there is still room for improvement to fully satisfy their clients.
Although Singapore's mobile banking usage is somewhat high compared with other
countries, at 38%, and much higher for customers of certain banks in Singapore,
customers are not highly impressed by the experience according to various surveys.
This gives many opportunities for banks to continue to develop these systems and
take market share from their competitors.
Foreign banks in Singapore are also increasingly finding new ways to tap into the
market and gain a share of their high net worth individuals and by leveraging their
international operations and resources to gain an edge in the mobile banking market.
Standard Chartered is looking to strengthen its competitive position in Singapores
crowded domestic banking space, where it may open upto 10 additional branches
following the consolidation of its consumer and small and medium enterprise (SME)
banking businesses into a locally-incorporated subsidiary. Standard Chartered
currently has 19 branches, seven priority-banking centers and 31 ATMs across 25
places of business in Singapore. But that number may potentially double once the
European Union-Singapore free-trade agreement comes into force. The bank will use
its mobile banking platform, which is quite famous in Asia, to gain an edge in the
market compared to its domestic competitors.
Wealth management has also become a major flashpoint for banks to compete in for
Singaporean banks. Intense competition, a tendency for wealthy Asians to use
multiple private bankers and high staff costs are likely to force consolidation in the
wealth management business in Singapore and could push operators out of business,
top private bankers have warned.
Signs of competitive strains in one of Asias biggest wealth management hubs stand
in contrast to an image of rising wealth as the number of multimillionaires grows
faster in the region than anywhere else.

18

DBS
DBS business model has been to compete on a universal bank model. Though they
have had substantial success in deposits, they have, unfortunately, been focusing on
matters outside their key strengths. Growth has been driven primarily by interest
income and it has been squeezed considerably in a low interest rate environment.
Loan and fee income growth was subdued in the last few years and considerably
lower in terms of growth compared to its domestic peer, UOB.
DBS retail financial services performance, compromised by internal changes over the
last years, has been stabilizing since 2011 but did not quite take off in 2012. Profit
gains hovered at around $26.5 million in 2011 and 2012, with a lower core deposit
collection than UOB. Despite its strong POSB franchise in the DBS family and its
largest network in the heartland of Singapore it fell short to leverage its network more
effectively. That showed up in their incremental income gain for 2012, which
continues to be lower, compared to UOB and OCBC.
Part of their subdued performance was due to management issues. The banks
sustainability and strategic direction has been hit by a series of management changes
and high profile exits in the last five years. In fact they had the least stable retail and
overall bank executive management. However, by electing Piyush Gupta as its CEO
in 2009, they have finally obtained the caliber, skillsets and personality they should
have been looking for in the first place.
With that in place, DBS can turn their attention to where they are hurting right now
their operations. The ATM network shutdown in 2010 reflected their inability to
engage with their business provider and end customers, and the ATM scam in
beginning of 2012, which was most likely due to the shutter being switched off as so
to speed up the long queues, cost the bank more than $0.78 million. Yet, the bank
gave communication and customer engagement a higher priority thereafter. It also put
more attention on queue management and quicker on boarding in the credit cards
business with its near instant approval of credit cards, a theme revolutionized by
Citibank a few years ago in Singapore.
DBS is also plagued by their mandate to provide banking services to all segments,
including lower income segments such as foreign contractual immigrants. DBS is
pursuing a containment strategy by rolling out differentiated service levels and
distribution solutions according to segment profitability.
A lot of capital has gone into reviving DBS and it is today the more valuable
franchise in the DBS POSB union. DBS did little until 2009 to rejuvenate POSB with
which 60% of Singaporeans bank. The POSB franchise today is clearly in better
shape than it was three years ago, but continues to be hampered by low cross-selling
and fee income generation per branch. It introduced POSB micro branches in 2012
with approx. 200sqm, which is part of the strategy to reduce the cost to
serve. DBS/POSB is in the process of changing their customer portfolio business
model, which will be tightly linked to the branch where 80% of unsecured business is

19

being originated. The two brands also moved from a business manager model to a
market manager model for their branch executives that will make them fully
responsible for all P/L issues, which is expected to bring them an upswing in terms of
conversion rates and productivity.
DBS key areas of retail competitive strength are deposits due to their largest network
of ATMs and branches, as well as in mortgages for public housing. DBS also has the
largest assets under management in private banking with over $81 billion (2011) in
earning assets. Cards currently contribute 10% to overall fee income but only 7% to
total retail income, while wealth management contributes 9% to total retail income.
In April 2012, DBS Group announced its acquisition of Bank Danamon. Yet, since
Indonesia has put a 40 percent cap on single ownership in its local banks and higher
capital cost for holding minority stakes under Basel III rules, DBS eventually was
forced to walk away from taking over Bank Danamon.
Strengths
Able to control interest rates better than its peers.
Sustained and robust retail fee income growth driven by treasury-related
income from the affluent segment and bancassurances business.
POSB franchise and strong deposit base with POSB.
Largest retail banking network.
Mortgage business (public housing).
Generates most insurance and unsecured lending business through its branch
network.
Leading market share in car loans, payments and savings.
Weaknesses
Predominantly reliant on interest income (fee income from cards 35% of fee
income).
Building the business to full capacity will take another three years, but
underlying momentum strong.
Operational and transactional risk handling.
Engagement with customers.
Business is currently restricted mostly to Hong Kong and Singaporeboth of
which offer little growth.
Opportunities
The only Singaporean bank with a real Asian presence that offers
opportunities to capitalize on growth in the region.
Improved contribution of fee income from cards and payments business and
treasury-related fee wealth management to cushion income from low interest
rate environment.
Building a protection portfolio in wealth management.

20

Threats
Need for balancing the profitability of the mortgage book with global
slowdown, as it is one of the largest books at DBS. Bank may be prone to
trade profitability with external risks.
Continued drag on bottom line performance due to mortgage customer rate
deterioration.
Continued low interest environment drag on performance.
Global outlook and the impact on investment products and securities.
Online and transaction risk (operational risk will increase).

21

OCBC
Although OCBCs retail banking business is the smallest among the three local banks
in terms of asset size, it has been growing in the last few years especially as it
continues to tap into emerging markets in Greater China and Southeast Asia. The
bank has a solid retail banking strategy, an experienced retail banking team, however,
it faces major challenges in expanding its growth in its own market.
Headquartered in Singapore, OCBC is the 30th largest bank in the Asia Pacific by
total assets, with good cost efficiencies and leadership network distribution, service
and product innovation. OCBC saw a change of guard at the C-level and retail
banking level in 2012. It appointed Samuel Tsien, who was the banks head of global
corporate banking, as CEO to succeed David Conner in April 2012. At the same time,
OCBC promoted Ching Wei Hong, currently the head of global consumer financial
services, to the newly created position of chief operating officer. Tsiens appointment
marks the transition from foreign to local management, a key theme in Singapores
financial services industry.
OCBC had three disastrous years after 2008caused mainly by internal reshuffling at
the retail executive level and a change of strategybut showed stronger numbers for
the first time in 2012 across assets, income, profit and deposits driven presumably by
Bank of Singapore, OCBCs private banking arm which the bank includes in its retail
banking reporting.
The low or negative growth base can explain the improved full year performance of
OCBC in 2012 from previous years, which is partially correct, and that one year of
positive results after three years in the doldrums does not necessarily point to a
stabilizing business. If anything it could be said to reflect volatility rather than
sustainability going forward. But, to our surprise, even if you take private banking out
of the retail segmentwhich UOB includes in their reportingOCBC still showed
better growth figures across income and pre-tax profit, and exceeded profit gains by
$8 million. The biggest upswing was seen in the growth in savings and checking
accounts in 2012, led by OCBC by a comprehensive margin and thereby redeeming
some of its initiatives introduced in 2012.
Relatively, to its other business lines, retail banking has not yet become a key growth
driver again, lagging its corporate, treasury and insurance business. But OCBC
appears to be stabilizing and we believe it bottomed out in 2011 and 2012.
When Singapore liberalized its banking sector in 1999, OCBC relied on a formula of
acquisitions and organic growth to shore up local operations and expand overseas.
After acquiring two banks in Singapore, OCBC articulated growth plans in its New
Horizons strategy in 2003, seeking international growth via a build-and-transfer
approach and utilizing the balanced business scorecard approach to build a high
performance bank. New Horizons II, a five-year plan from 2006 to 2010, followed
this.
Under this plan, OCBCs key retail team introduced various channel initiatives aimed
at providing a unique customer experience. OCBC added an advanced mobile phone
platform in 2005, the first in Southeast Asia, and supermarket banking in 2007, and
was the first bank to actively integrate its distribution network regionally with its

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operations in Malaysia and Indonesia. In totality, these initiatives aimed to rejuvenate

and integrate the network, aligning it with changing customer behavior and potential
future users. OCBCs primary objective pre-crisis was to introduce an interactive and
consistent banking experience to its customers through a range of personalized online
services. These enabled the bank to deliver total convenience banking.
Post-crisis, OCBCs retail balance sheet performance has been on the decline,
partially due to the change in retail management, which saw a hiring spree of overseas
foreign executives. Unlike its domestic peers, the bank has not seen a recovery in its
retail financial services yet. Bancassurances business had a weak 2011, and the cards
business suffered from high expenses. However, wealth management re-bounded and
will continue to be the main fee and commission income earner going forward. We
expect the new strategy and the changes implemented since 2011 in its back and front
office to take effect gradually and a full recovery will not come before 2014.
OCBC embarked in 2011 on Horizon III, a five-year plan that encapsulates a vision,
which has strong similarities with New Horizon II in a bid to become a more
customer-centric organization. OCBC intends to differentiate itself by delivering
banking in an innovative, engaging and relevant manner, launching multiple
transformative business models, including retail, premier banking, cards business,
account opening and channel redirecting, in particular for its online and mobile
banking platforms which OCBC wants to turn into a sales platform. It is in the front
office that OCBC is putting its focus by embedding analytical decision-making,
straight-through processing and richer visual interaction with customers.
It also capitalized on foreign assets in the aftermath of the crisis. OCBC took over
INGs private banking business at the end of 2009, tripling the bank's private client
assets under management to $23 billion and making it one of Asia's leading private
banks. It was renamed Bank of Singapore and operates as a separate entity. Its earning
assets stood at $39.6 billion as at end 2011.
With its subsidiary, Great Eastern, it continues to be market leader in the overall
bancassurances market, where it has held a market share of above 34% since 2001. In
addition, the bank identified opportunities in top segments and introduced two new
plans in 2012 to cater to the financial and estate planning needs of the affluent.
Being not a dominant player in the mortgage loan market, it could improve slightly its
market position in 2012. It implemented a more segmented view on the portfolio and
started to reduce further cost by leveraging on the bancassurances direct sales force to
cross sell mortgage loans.
Unlike its domestic peers, OCBC targets the generation X segment of which there are
about 700,000 in Singapore, aiming at capturing about 50% of the market and to
break even by 2015.
OCBC has a sizeable overseas retail business. 80% of retail banking income is from
Singapore while OCBC Malaysia contributes around 13%, followed by OCBC NISP
(Indonesia). However, it is OCBC NISP which is currently a key retail profit driver in
its overseas business.

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Strengths
Most advanced domestic bank when it comes to engaging customers on social
media without buying fans as is being done by its peers.
Strong market position on wealth management fee income.
Competencies in creating meaningful interactions by steering customers into
themed, zoned experiences designed for specific purposes.
Innovation at product and service level.
Bancassurance.
The use of analytics
SME banking (small to mid-sized segment).
Weaknesses
Credit card business.
New management team will take time to form and contribute effectively to
bottom line.
Discontinuation of online and mobile distribution strategy held by previous
management team up to 2009.
Supermarket banking and NTUC card usage suffer from low adoption rates.
Branch banking.
Opportunities
Improved contribution of fee income from cards and payments business and
treasury-related fee wealth management to cushion income from low interest
rate environment.
Targeting the young segment in Singapore (FRANK initiative) with a fullfledged product and service proposition.
Threats
Given the small size of the domestic market and the relatively stable market
shares, OCBC, the weakest among the three domestic banks, is still a potential
take-over target.
The scalability of OCBCs efforts is constrained by the nature of the overseas
markets where the bank is staking its long-term future. A regional strategy to
re-platform is underway but whether OCBC can apply such adaptive
knowledge to build a stronger retail franchise outside Malaysia in the vastly
different environments of China, Indonesia and Vietnam remains to be seen.
Ambitious plans to capture a large size of the youth market.

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UOB
UOB has been building on a well-diversified portfolio, with notable strength in the
privileged reserve segment, the corporate business in SME/Business banking and
payments. Yet, UOB is currently not able to leverage its retail asset growth which was
the strongest compared to DBS and OCBC in 2012, to boost its top and bottom line
growth. In fact, since 2008, income and profit growth have slowed significantly for
UOB. What is worrying is that income gains in terms of the Singapore dollar have
also been slowing. We believe the pressure on top line growth results from a low
innovative retail services culture and a very conservative approach in adopting new
trends. Retail profit contribution to total profit declined by 4% yoy in 2012.
Over the course of 4 years between 2008 and 2012, UOB extended its retail asset
contribution to total asset from 55% to 60% and its retail deposit contribution from
65% to 72%.
UOB might not have shown strong growth over the years but it showed growth
neverthelessat a time when both OCBC and DBS failed to do so in particular post
global financial crisis. A family owned bank in the 3rd generation, it escaped the
discontinuities at DBS and to a minor extent with OCBC, both who suffered from
management changes in the past, and has recently introduced a younger generation of
managers in its consumer banking business.
Mass retail, privileged reserve (wealth management) and private banking are the key
segments for UOB, yet its key growth segments are the privilege ($100-350K) and
privilege reserve ($350K-2million). The strategy aims at capturing also a solid and
stable core depositor base.
With about 80 relationship managers in this segment its success relates to being
focused. Its success is based on well-trained staff plus the focus on a few products
that drives better performance than taking a broad based sales approach. With intense
cost pressure it centralized its resources across the region and scaled back on big
investment which UOB views as ineffective in the current environment. Despite its
rapid growth in this segment and sales success it trails in regards to cross sell ratios in
those segments compared to its peers in Hong Kong and international players in
Singapore. Although it has Prudential as a partner, it is not yet a strong player in
bancassurances. UOB expanded its regional network with 13 more dedicated wealth
management centers increasing the regional wealth management footprint to 49
centers in 2012. By end of 2012 it managed $66 billion AUM spread across its
customer base of 155,000. It aims to grow its regional wealth management
contribution by 50% in 2015 as of 27% by end of 2012.
Amid intense market competition, UOB has maintained its leadership position in the
private residential home loans segment by making enhancements to the customer
experience by introducing instant mobile loan approval on site.
In 2012, the bank also implemented a paperless electronic account opening service,
introduced cardless cash withdrawal, and made steady progress towards a fully
integrated regional platform. Key regional markets such as Malaysia and Thailand are
a significant profit driver, with regional profit growth outpacing that of Singapore.

25

Thus, harnessing the potential of its regional network will be crucial for future growth
and success. UOB reiterated that it is on track to complete its regional core-banking
platform by end of 2013 connecting its last two countries, Malaysia and Thailand.
It is not a major risk taker in developing new products and services. A case at hand is
that it only introduced a full-fledged mobile banking service end of 2011 lagging its
peers by about 2 years. While being risk averse and slow moving, UOB has started to
move up a gear in introducing changes at the front and back office to maintain a
dominant position in the market.
23% of its retail business currently comes from its overseas operations. UOB aims to
generate 40% of revenue from overseas in the future (currently 23%).
Strengths
Corporate segment of SME business
Credit card management (high revolving ratio, strong profitability in premium
card segment, good call center service management, credit card fee income
contributes 17.5% to overall fee income of the group)
Wealth Management (Privilege Reserve)
Senior level management stability with young stars given key
responsibilities
Prudent cost management
Strong fee income generation (36% contribution to total retail income)
Strong contributions from its Malaysian and Thai retail operations
Efficient collection of core deposits through its branch network
Weaknesses
High turnover of junior staff in business banking and at the front line (teller)
Siloed business lines (e.g. credit cards)
Low levels of automation (only recently addressed)
Low analytical capabilities
Low flexibility in responding to market changes
Bancassurances
Credit card approval (6hrs for existing customers)
Outdated IT and core banking platform
Opportunities
Leveraging on continuity at C-level and high degree of trust in the bank for
wealth management and SME banking
Regional retail banking expansion
Threats
CIMB Bank in the SME banking business
DBS is in strong recovery mode in its overall retail business
Citibank in Credit Cards
OCBC in bancassurances
Missing the hip factor for the younger segments and upcoming professionals

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Citibank
Citibank Singapore is the flagship country operation for Citi Asia Pacific where most
of the retail and payments innovations are being incubated before being rolled out in
Asia. Since 2005, the bank has been licensed by the Monetary Authority of Singapore
(MAS) as a qualified full licensed bank to engage the full scope of banking
business in Singapore.
Citibank Singapore with a S$12 billion consumer banking portfolio has de facto
became a powerful local player in the Singaporean market growing its franchise and
branch network. It continues to grow its franchise by expanding aggressively its
physical distribution network. From just four branches and 1 off-site ATM in 2005,
the bank is now accessible to customers at more than 1,000 touch-points including 25
branches, 216 Citibank ATMs and 120 ATM locations under the shared ATM5
network. It has made inroads not only in the city center but branched out successfully
into the urban neighborhoods and micro transit branches at all major underground
train stations. Its a dominant player in the wealth management space with its iconic
Citigold brand and a strong player in credit cards. Next to its private banking
services Citigold Private Client for high net worth individuals (HNWIs), which it
launched in 2010, it introduced, in line with other banks, an emerging affluent
segment in 2011.
Up to 2005, Citibank retail financial services propositions in Asia Pacific were
hardwired towards the affluent and HNWI, and its banking franchises in the region,
outside the credit card business, were regarded as niche and exclusive. Then Citibank
executives saw growth opportunities beyond the Citigold proposition, making a farreaching decision to expand their franchise further. In essence, it articulated an
expansion strategy from high street to Low Street, from high profile locations in
residential areas, business districts, shopping belts, arts and entertainment, aiming to
take away business in retail financial services and core deposits from local players. In
2007, it opened mass transit micro branches in the traffic heavy commuter districts of
Singapore and Hong Kong in conjunction with the introduction of an integrated credit
and mass transit card.
The partnership with Singapore Mass Rapid Transit Corporation (SMRT)
subsequently served as a primer for other countries in Asia Pacific such as Hong
Kong. Citibank set up the transit branch concept, a micro branch with a footprint of
40-60 square meters in high traffic areas such as train stations or subways, thus taking
the branch to where it was most convenient to customers, marking a shift in the
branch paradigm from you come to us to we come to you and out of the way
branches to on your way (transit and connectivity). It was also innovative since it
was the first bank leveraging transit innovation with a strategic partnership (SMRT
Card for Singapore and Octopus Card in Hong Kong) for markets where Citi had a
weak physical footprint. Downsizing the branch, it also reengineered its processes and
services. Another innovation was on-the-spot issuance of credit cards, which could be
processed and handed out to eligible customers within 30 minutes, which were
bundled with a mass transit ticket application. The branches are open seven days a
week, 12 hours a day and are staffed with two to three people, who are multi-skilled
and able to deal with everything from opening stock accounts to loan underwriting.

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In 2010 Citibank Singapore unveiled the next leg in branch banking under its smart
branch-banking banking concept. Designed as a transit branch featuring extensive
use of digital technology including display panels forming media walls, interactive
touch-screens, face-to-face phone banking and video-conferencing facilities for
interactions with banking specialists. In addition, the branch provides for other
innovations including a cheque-deposit machine with imaging technology, iPads
carried by in-branch staff and a workbench with Apple terminals for account openings
and other services. Citibank Japan followed later with its own but same format hightech and multimedia, offering the availability of the latest interactive technology in a
single store and integrated paperless workflow processes, information transfers and
discovery in an open workbench environment.
Though issues remained on the richness and depth of service applications, the
customer experience-driven branch concept with a superior human interface and very
high degree of automation aimed to meet customer expectations of instant delivery
and always on connectivity. The revolution was largely possible due to the
incorporation of technology as seen from the state-of-the-art touch points. Citibank
intends to introduce this branch concept into mature markets in the Asia Pacific over
the next years.
In 2011, Citibank Singapore introduced 24 hours online e-chat services and solutions
for wealth transfer and legacy planning, as well as access to funds typically reserved
for institutions and high net worth individuals. It also introduced greater self-control
on card security, by allowing customers to activate and de-activate cards for local and
overseas usage. It also has improved its rewards redemption programme in regards to
ease of usage in the last years in Singapore. In addition, it launched SMS Pay late
2012 to allow clients to pay their bills via SMS.
Yet Citibank Singapore has been coming under pressure to grow top line growth post
global financial crisis. Singapore will require foreign banks with a big share of the
country's retail deposits; Citibank is one of them, to incorporate their retail operations
here to protect depositors. The government may allow also a "very small number" of
QFBs that are "significantly rooted" in Singapore to increase the number of business
locations they can operate here to 50 - including as many as 35 branches - up from a
maximum of 25 places of business now. This will be part of an overall package
negotiated with the banks' home countries, which have signed free trade agreements
(FTAs) with Singapore.

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Strengths

Weaknesses

Wealth management
Consumer finance and credit cards
Phone banking customer service
Internet banking
Turnover rates of front line staff is high, might indicate internal
dissatisfactions of workforce
Often too many consumer banking initiatives are taken on which are
hard to complete
Mortgages
Hierarchical
Flagging top line growth

Opportunities
Deepening its franchise by growing further its physical network
Consumer finance
Affluent and emerging affluent business
Threats

Global outlook and the impact on investment products and securities

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How to Leverage MILSTE for Banks & Technology Vendors

Successful strategies leave nothing to chance. That is why financial institutions and
multinational technology firms throughout the world commission custom research
from MILSTE to enrich their insight for sharper business decisions. We provide
multiple tailored approaches to clarify your strategy in any market to ensure that your
firm is fully utilizing all of its resources to gain a competitive edge against your
competitors.
Benchmarking
We can provide a detailed evaluation of competitors operating in a market you are
considering for expansion; evaluate local human capital including the overseas talent
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Country analysis
We can provide you with an in-depth understanding of specific political and
economic issues and forecasts including scenario analysis. You may be interested in
business environment analysis or cross-country benchmarkingour global reach and
ability to focus on your business needs within a cross-country framework is
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Forecasting
We are able to help you to understand where you are most likely to find the greatest
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Indexing
Our expertise is not limited to business or government applications. We can combine
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We can identify where the greatest demand for your productand the greatest
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We can identify obstacles your company may face from exposure to new markets and
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situations alongside places and activities you already know. We can provide country-

30

specific, operational and financial risk ratings to help you to make informed decisions
on a number of different indicators, including early warning of possible market and
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More details
MILSTE specializes in creating intelligence and strategies to give financial
institutions the knowledge they needed to become more competitive in their market.
We are able to provide benchmarking information that allows financial institutions to
know where exactly it is compared to other competitors in the same market, and we
also provide strategies on how to acquire more market-share to compete with other
banks in the same region.
We have vast amounts of knowledge and intelligence on risk management
capabilities, core banking, data analytics, treasury systems, mobile banking, Internet
banking, credit card marketing strategies and so much more. We are able to analyze
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We are able to help technology companies that are interested in exploring new
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We are also able to conduct surveys to acquire specific information and intelligence
on regions capabilities to allow the vendor to see what may or may not be in demand.
Writing detailed case studies about successful technology implementations, and white
papers about markets, new technologies, or projects are also easily done by our staff.
We are also able to set up meetings such as exclusive roundtables with CIOs, CTOs,
and CROs in any country in Asia and the Middle East. These types of meetings will
be arranged in a manner that demonstrates the vendors knowledge in a soft yet
professional way with senior banking executives.
If you would like to know more, please contact:
Mr. Steve Singh
Managing Director
Hong Kong
+852 60470750
Ssingh@milste.com

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