Grab will launch a digital bank in Malaysia next year. GXS Bank, a partnership between Grab, Singtel, and Kuok Brothers received a digital bank licence from Bank Negara Malaysia earlier this year, according to Grab.
The bank just set up an office in Singapore, and it wants to improve banking for its clients by using both its technical ability and the strength of the GXS, Grab, and Singtel ecosystem.
According to Marketing Interactive, Grab is using the information that it has on its earnings and behaviour to provide more reliable financing to MSMEs and gig workers in Southeast Asia, where conventional banks are aware of their under-support. As a result, the GXS Savings Account is the company's first financial product launched.
According to a recent statement made by Grab during its maiden Investor Day, the business anticipates its digital bank operations will break even by 2026. By the second half of 2024, it also anticipates reaching break-even on group-adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) basis.
a 27% increase over the first half of 2022 is anticipated for the group to adjust EBITDA loss for the second half of the year, which is projected to be US$380 million.
The business anticipates that group revenues will increase significantly between 45% and 55% year-over-year on a constant currency basis in 2023, with an emphasis on sustainable growth.
Hence, digital banks are becoming popular and claimed as the future. Let’s take a look at its definition, its security, and its profitability below.
The definition of digital banking
A digital bank account is a bank account that is accessed through a computer or mobile device. Accounts are available in many different languages and can be linked to an individual's checking or savings account at another financial institution.
According to Forbes Advisor, the term digital banking is combined between online banking and mobile banking.
Online banking
This way of banking emphasises the process of using a computer to access your bank's website and use its features and services. If you want to check your balance or pay your electricity bill, you can log into your account.
You can use your online banking login to access additional financial options like applying for a loan or credit card at various banks through the banking online portal. Online banking makes it possible to do your personal finance activity through your devices.
Mobile banking
This term refers to using an app on a mobile device, such as a smartphone or tablet, to access many of the same banking features. These bank-issued apps are proprietary and are typically accessed using the same login credentials as your internet banking account.
Further, mobile banking apps typically come with the most popular banking services, such as mobile check deposits, funds transfers, and bill payments.
Additionally, they frequently include practical elements like peer-to-peer payment systems. Banks may also give their clients banking announcements via their mobile apps, such as notifications of fraud and low balances.
Hence, digital banking is a combination of online banking and mobile banking on the go.
How does a digital bank work?
Digital banking works by using technology to enable customers to open and use accounts without having to visit a physical bank branch. Instead, customers access their accounts through their computers or mobile devices. This allows for faster and easier transactions, as well as increased security because customers can control their information more securely.
The benefits of digital banking
You can use a digital banking account to make payments, invest, shop, and more. Hence, the digital bank is going to be popular, here are the benefits you may get:
Make Payments: With digital banking, you can easily make payments including connecting to the payment gateway by using your computer or phone. Simply input the money you need to spend and your desired payment method (bank account, debit card, etc.). You’ll be able to make all of your transactions in one place without having to carry around multiple cards or wallets.
Investment: You can use digital banking to invest money. Just prepare the money you want to invest, then follow the steps of investment information.
Shopping: One of the benefits of using digital banking is a simple transaction when shopping. Further, you can save time by shopping online and then taking your purchases home with you.
Is digital banking secure and profitable?
The profit of digital banking
One article from Top Mobile Banks showed that only 13 of the 249 digital banks in the world have proven successful (10 in Asia-Pacific, two in the UK, and one in Russia). Only 5.22% of the total.
Even digital banks that have operated for over four or five years still prioritise customer acquisition over financial success. So, how about the digital bank in southeast Asia in detail?
Shweta Jain, Head of Product (Digital, Analytics, and Platform) at Finastra stated that a digital bank's success is determined by its products and services. Every digital bank in every nation has a unique offering that determines its success, according to Tech Wire Asia.
Jain also stated that it’s still too early to predict the performance of digital banks in Malaysia. Digital banking in Malaysia would presumably revolve around mobile wallets, which have been a huge success there. The issue that these digital banks are currently facing that will define their success is trust.
However, despite these issues, the region has seen a rise in the popularity of digital banking services. More people are accepting online and mobile payments and other services. Digital banks are the way of the future, but there is still a long way to go, especially in terms of gaining consumer trust.
Cybersecurity of Digital Bank
Jain added that cybersecurity is still a concern when it comes to digital bank technology, and building consumer trust. Make sure that digital banking giving services online via a web app or mobile app is a must. Here’s why big tech companies play important roles.
Today, big tech companies are making technology more straightforward and more secure for consumers. Some of these tech companies are also working with banks, both digital and incumbent, to have their technology involved in digital offerings and product development. For example, using the cloud for certain core banking services.
