Singapore banks could lose 5% of operating income from disruption: MAS study

SINGAPORE banks that do not fend against fintech disruption could stand to lose more than 5 per cent of their operating income, a study by the Monetary Authority of Singapore (MAS) showed on Thursday.

In its Financial Stability Review report, the MAS said most of the potential reduction in operating income would come from disintermediation in the payments space. Banks in Singapore, Hong Kong and South Korea are more reliant on fee income from payment services than their Asian peers.

“The estimated potential reduction in operating income is based on an unmitigated scenario in which banks do not take actions to address the fintech competition,” the MAS said. “In reality, banks can also harness technology – those that adopt a digital model successfully could perform better compared to those that do not.”

The MAS also cited numbers suggesting that cost savings from leveraging fintech – such as in automating banking functions or the use of artificial intelligence – could yield a 30 per cent reduction in costs. That in itself represents 10-20 per cent of Asian banks’ operating income.