Digital banks in Singapore surge in revenue but sink deeper into losses as profit proves elusive

SINGAPORE: The city-state’s digital banks, which have been operational for about two years, continue to face significant challenges in turning a profit.

While the three banks catering to retail customers—GXS Bank, MariBank, and Trust Bank—reported increases in revenue for 2023, they all fell deeper into the red, highlighting the ongoing hurdles in achieving financial sustainability.

Steady revenue growth, but losses persist

According to The Star report, GXS Bank, a joint venture between Grab Holdings and Singtel, reported a remarkable threefold increase in revenue, reaching S$14.3 million in 2023.

Despite the surge in income, the bank suffered a substantial loss of S$152.1 million due to mounting expenses.

Similarly, MariBank, owned by Sea Group, saw its revenue skyrocket sixfold to S$10.1 million, but losses ballooned to S$52.2 million, driven by higher operational costs.

Trust Bank, which holds a full banking license and offers a wider range of services, including ATMs, also experienced significant losses.

Despite a thirteenfold revenue growth to S$39.1 million, the bank posted a loss of S$128.4 million in 2023.

Long-term growth plans amid losses

Experts suggest that profitability for these digital banks is not expected anytime soon, as they focus on building market share and customer bases.

Tania Gold, senior director for Asia-Pacific banks at Fitch Ratings, said digital banks invest heavily in customer acquisition, technology development, and regulatory compliance in their early stages, which typically leads to losses over the first two to three years.

GXS Group’s CEO, Muthukrishnan Ramaswami, or Ramu, emphasized that the bank is pacing its growth and is not in a rush to expand too quickly.

GXS Bank plans to break even by the end of 2026, as per its proposal to the Monetary Authority of Singapore, focusing on responsible growth by gradually increasing deposits and ensuring loan quality.

As these digital banks strive for profitability, they are also exploring ways to expand their offerings to meet a wider range of financial needs, from savings and loans to investments and insurance.

The challenge remains to engage and retain customers who may open accounts out of curiosity but are not active users of the platform.

The digital banks‘ success will depend on their ability to drive user engagement and offer a variety of services that meet customers’ financial needs in a competitive landscape.