Singapore bank branch closures lead customers to rivals: Bain

Singapore bank branch closures lead customers to rivals: Bain

Singapore had the second lowest number of commercial bank branches per 100,000 adults among 21 countries last year, fewer than Malaysia's and above only China's rate, management consultancy Bain said in a report on Friday that looked at customer loyalty in retail banking.

It also found that Singapore banks have been fairly aggressive relative to other countries' in closing branches, and more than half of Singapore bank customers who experienced a branch closure subsequently switched to other banks or started using products or services at competing banks.

The consultancy polled 137,034 people across 21 countries, which were mostly developed markets such as the United States, the United Kingdom and Germany, but also included a handful of emerging markets such as China, India and Brazil. There were 2,783 respondents in Singapore, a spokesman said in an email.

Bain estimated that there were nine commercial bank branches for every 100,000 adults in Singapore last year and that that figure had slid a compounded annual 2 per cent over 2006 through 2015. China's rate was eight, the lowest number among the 21 markets, and Malaysia was third from the bottom with 11.

Singapore banks also ranked sixth out of 20 markets in terms of aggressiveness in closing branches, with 10 per cent of Singapore-based survey respondents saying they had experienced a bank branch closure in the past 12 months. The poll was done over July through September this year.

Bain said that globally, about 40 per cent of bank customers who had experienced a bank branch closure "took their business to other banks"; and that in Singapore, more than half of the survey respondents either switched banks or started using products and services from other banks after experiencing a branch closure.

About 30 per cent of Singapore-based respondents also said they would switch their primary bank if it were easy to do so, the consultancy said. It added that Singaporean customers, "up to 40 per cent of the time", buy new banking products not from the bank they considered their primary bank but from competitors that were "better at digital marketing, sales and service".

Respondents' self-declared primary banks got nearly two-thirds of all bank purchases on average but those purchases were mostly new, low-value deposit accounts, and the primary banks often lost higher-value products to "direct" or branchless banks along with financial technology or fintech firms "because of their relatively simple products lines and streamlined user experiences", it said. In Singapore, insurance was the product most often purchased at competing banks, followed closely by credit cards, it added.

Chew Seow-Chien, partner and head of Bain's financial services practice in South-east Asia, said in a press release on Friday that there were "a lot of customers who frankly consider themselves prisoners in their own banks".

"They don't switch their primary bank because it's too much hassle to do so. But they're going to go elsewhere for any new needs, and if someone makes it easy to escape their bank for a better place, they're going to run right out," she added. Bain makes money from advising companies such as banks.

The consultancy said that the Singapore bank with the highest "net promoter score", a metric it uses to gauge customer loyalty, was OCBC Bank Singapore. It did not mention DBS or UOB and did not say precisely how it calculated net promoter scores, but said for Asia it only included banks with at least 100 responses.

This article was first published on Dec 03, 2016.
Get The Business Times for more stories.

This website is best viewed using the latest versions of web browsers.