Singapore’s digital banks, once hailed as a sharp fintech scalpel for slicing through the bloat or inefficiencies of traditional finance, are now wrestling with a sobering reality: profitability remains an aspirational target. It’s no longer just a battle for market share; it’s a fight for business viability.

In 2024, the trio of GXS, MariBank, and Trust Bank collectively posted a net loss of S$359 million ( US$277.37 million ), in stark contrast to the S$25 billion in combined profits recorded by their legacy counterparts DBS, UOB, and OCBC.

The initial promise of digital disruption, lower fees, higher savings rates, and better client experience is being challenged. Notably, several neobanks trimmed deposit rates earlier this year, chipping away at one of their most competitive features.

Smriti Gupta, chief financial officer of Audax, the Standard Chartered-backed digital banking platform, believes the profitability gap is more than just about scale. “Legacy banks have learned fast,” she notes. “They’ve matched many features of digital-first banks while pouring millions into their own infrastructure.”

Indeed, DBS, long seen as the benchmark for digital transformation among incumbents, has become a digital juggernaut in its own right. The question now could be whether the digital natives can find a sustainable business model before they run out of runway.

High-margin space

Financial discipline is emerging as a differentiator. “Compliance, cybersecurity, data infrastructure, these are not optional,” she says. “For digital banks, these costs hit hard, especially without the high-margin lending products to offset them,” Gupta says.

The proliferation of new services such as Trust Bank’s latest fractional trading and ETF products can be seen as efforts to diversify beyond basic current account and savings account offerings. But such products, while welcome, are not always profitable. “You have to move fast into high-margin spaces to survive. Payments alone won’t cut it,” she says.

Customer acquisition costs, meanwhile, remain high. While Trust Bank has enjoyed strong brand affinity through its affiliation with the supermarket group NTUC FairPrice, Gupta notes that some customer bases may be too narrow or too transactional to support wider product engagement.

“Many users still see digital bank accounts as a convenient way to access promotional benefits or manage everyday spending, while turning to other platforms for more complex investment needs,” she observes.

Sustainable models over speed

Across Asia, regulators have been cautious with digital banking licences, and for good reason.

Gupta stresses that speed without structure is a recipe for risk. “It’s not about ‘move fast and break things’. In finance, breaking things has consequences,” she notes. Instead, building resilient credit and risk frameworks, rooted in the discipline of balance-sheet banking, not just fintech experimentation, is key.

In Singapore, where financial inclusion is already near saturation, the edge doesn’t come from expanding access; it comes from smarter products and operational efficiency. “You won’t win by simply replicating what already exists,” Gupta asserts.

Perhaps the most complex challenge is making financial access commercially viable. “You can’t scale purely on goodwill,” she says. “Inclusion must be designed into the business model.”

That means structuring products to generate recurring revenue, not one-off onboarding incentives or unsustainable cashbacks. Gupta points to the need for modular, scalable tech infrastructure that allows rapid iteration, personalized experiences, and real-time risk assessment, all without bloating the cost base.

Will the tide turn?

Despite setbacks in Singapore, digital banking isn’t moribund; it’s evolving. Other markets, such as India and Indonesia, where financial access gaps remain wider, present riper opportunities. And examples like Hong Kong’s ZA Bank, which recently turned a profit, suggest that success is possible with time and discipline.

Even in Singapore, Gupta sees signs of maturity. Losses are narrowing, customer bases are stabilizing, and more high-margin products are in the pipeline. But the days of easy growth are over.

“Ultimately, scale used to be about branches. Now it’s about innovation,” she says. “But innovation is no longer exclusive to the start-ups. Incumbents have caught up.”

For neobanks, the next few years will be a test of patience, prudence, and product. Those that survive may still reshape the financial landscape, but only if they can get their offerings and mathematics right.