Banks

Banks: In a recent interview, DBS CEO Piyush Gupta shared that he has been losing sleep over Internet finance becoming a "clear and present danger" for the banking industry.

Market watchers, including Gupta, are warning that digitisation in the Internet space is disrupting and dislocating the industry value chain and could render traditional banking models obsolete.

Internet services providers such as Alibaba, WeChat, Apple, Tencent and Google have been encroaching on every part of the banking business, which includes lending, payments or risk management.

In Jun, e-commerce giant Alibaba opened its online bank in Jun to serve small and micro corporates in China. Since then, Alibaba has secured a banking license in India, and submitted an application for another licence in South Korea.

Unlike traditional banks, whuch are hampered by massive headcount, rental expenses on branches, immense IT systems and heavily regulated, digital players are more agile, carry lower overheads, operate under less onerous regulations and are able to leverage on new technology to offer a quick and differentiated experience.

Traditional banks must therefore respond to this new challenge by digitising their own offerings, or face elimination.

Cybersecurity is also an extremely big threat in the digital space, which banks must tackle.

While the local banks are ramping up their technology and Internet presence, none has yet a clear and well-defined strategy to deal with the competition from the Internet giants.

Currently, both DBS and UOB are valued at 1.05x P/B, while OCBC is trading at 1.09x P/B.