With technology rapidly disrupting the financial industry, it is imperative that Singapore's banks and regulators keep up to date with the changes, Prime Minister Lee Hsien Loong said yesterday.
Mr Lee told guests at United Overseas Bank's (UOB) 80th anniversary dinner at the Marina Bay Sands Convention Centre that lacklustre global growth, a regional economic slowdown and a prolonged period of low interest rates have crimped net interest and investment income.
Tighter regulations after the financial crisis of 2008 have also contributed towards a more challenging operating environment today.
On top of all these, technology is moving very fast with new business models disrupting traditional banking, Mr Lee noted.
For example, more and more people are making payments - for everything from movie tickets to restaurant meals - through their smartphones.
Companies are finding new ways to assess loan worthiness by using data such as a customer's smartphone usage and social network data, and not just relying on credit bureaus, which are traditionally the preserve of banks.
The insurance industry is also finding new ways to assess risks, set premiums and incentivise behaviour, Mr Lee noted.
He cited how insurers can monitor wearable technology and offer premium discounts to policyholders with a healthy lifestyle.
Singapore's banks must keep up, he said, noting: "Our banks are in a strong position. We are in the heart of a rising Asia. Our banks have strong balance sheets. And with a strong regional presence, they can take advantage of many opportunities around them."
However, this is a highly competitive and rapidly evolving industry, Mr Lee added.
"So we have to keep upgrading our technologies, our services and business models. Because, while overall, our banks are quite good, in almost every specific area, we can find other banks in the world that are better than us."
In terms of digital banking, he noted, there are good models in the United States and Australia that offer a wide range of products and services, have clear and simple interfaces and help customers to make financial decisions.
He also said that just as the Government plans for political succession, banks too must plan for leadership succession.
Mr Lee noted that Mr Wee Cho Yaw, who led the bank for 40 years, handed over the reins to new chief executive Wee Ee Cheong eight years ago.
Two years ago, the older Mr Wee handed over to a new chairman, Mr Hsieh Fu Hua.
Banks "must continue to build up robust board processes and groom the next generation of leadership", he said. "Then UOB can scale new heights and continue to succeed for many years to come."
While banks continually innovate, Mr Lee said, there should be a balance between risk-taking and prudence.
The Monetary Authority of Singapore will also have to stay updated, he added. The regulator has to know what new risks are emerging but also allow new activities in a controlled way, so that it does not stifle innovation but promote it - though with safety and prudence.
UOB chief executive Wee Ee Cheong also spoke, noting that the bank is well placed to seize the tremendous opportunities that will come with the rise of Asia, increasing connectivity and cross- border flows.
He said: "Seizing opportunities requires us to be forward-looking, to take risks and to persevere in the face of challenges. We will do so by striking the right balance, between preserving our heritage and embracing change, to be relevant for the future."
UOB also announced yesterday that it was setting up the Wee Cho Yaw Future Leaders Award, a scholarship programme to help provide tertiary education to students from less privileged backgrounds.
The $50 million programme, named after UOB's chairman emeritus and adviser, was established with a $20 million gift from UOB and a 1.5 times matching grant from the Government.