Reevaluating the prospects of Trust Bank

Written by Kapronasia || September 25 2023

It’s always good to revisit assumptions, especially when the bank you are analyzing is an offshoot of an incumbent as large as Standard Chartered. When we initially heard that there was a new kid on the block among the digital banks in Singapore – but not altogether “new” – we were skeptical because the value proposition was anchored in, well, groceries. It’s just not the first thing that comes to mind when one thinks about how to build a successful lender. That said, the ecosystem play by Standard Chartered and Fair Price Group appears to be bearing fruit (no pun intended).

Trust has some data that suggest it is gaining some solid traction: 600,000 customers have signed up in the year since it launched (12% of Singapore’s bankable market) which have spent more than S$1.6 billion on their Trust cards, which includes debit and credit cards.

While a lot of platform companies purport to have great ecosystems, in reality many of them just pile different services on top of each other and see what works. The reason this is common is that many tech startups have pressure to grow fast from VC backers. They have to subsidize customers in the process of building scale, and they burn piles of cash.

Trust Bank is different. Its owners are established and very profitable. While they may have ambitious targets for Trust, that’s different than being a VC expecting to get a certain return from a startup investment within a specific time period. As for the ecosystem, it’s targeted instead of all over the place.

Now, for the grocery connection. FairPrice’s Link Rewards program is free to join and proving to be very popular. Link Rewards members earn 0.50 Linkpoints for every $1 spent in-store at FairPrice, Warehouse Club, Unity Pharmacy and Cheers, or online at FairPrice. With the accumulated rewards, members can redeem $1 with every 100 Linkpoints to enjoy instant savings off groceries or they can exchange the points for partner points or airline miles with Cathay Pacific.

Because Link Rewards is a mature rewards system rather than a slapdash subsidy program – it appears to be not driving up the cost of customer acquisition too much. Trust Bank CEO Dwaipayan Sadhu told Vulcan Post earlier this month that the bank’s customer acquisition costs are “sustainable” and roughly seven times less than the usual market rate – we’d like to know how “usual” is defined though.

Sadhu says that 70% of the bank’s customer base comes from referrals by friends and family. If Trust can rely on word of mouth for more than 2/3 of its referrals, its marketing costs are going to be much lower than a competitor that needs to offer an absurdly high interest rate to attract customers.

With that in mind, Trust’s goals of being the No. 4 retail bank in Singapore and achieving profitability by 2025 seem feasible. In other words, the digital lender has no intention (for now, anyway) of challenging DBS, OCBC or UOB – but wants to fit in right behind the Big 3.