Thursday, 10 August 2017

Can You Buy a Car From a Bank? Why Not, Says DBS

Can you buy a car from a bank?

Why not, says DBS (SGX: D05)

Singapore's largest bank by assets has teamed up with local online used car marketplaces sgCarMart and Carro to launch a new digital platform called DBS Car Marketplace.  (You can read the press release here.)

The new portal attempts to match car sellers and buyers directly.  Advantages touted for the car sellers include full control and transparency over every step of the sale process.

DBS Head of Consumer Banking (Singapore), Jeremy Soo elaborates,

“DBS Car Marketplace exemplifies how we are reimagining banking, using digital technology and innovation to extend our reach. Our insights indicate that consumers increasingly value transparency and simplicity, particularly in large purchases such as cars. We’ve therefore designed the marketplace so buyers and sellers are seamlessly guided throughout their purchase or sales journey – from start till completion – and provided relevant financial and product information."

DBS is trying to extend its digital reach via a legal amendment announced by the Monetary Authority of Singapore (MAS) in June this year.  The banking regulator has decided to provide more leeway for banks to conduct "permissible non-financial businesses".  (You can read the MAS announcement here.)

The rationale is explained as follows,

"MAS’ proposed refinement will allow banks to broaden their ability to provide a fuller suite of services to their retail customers.  Beyond digital platforms, banks will need to seek case-by-case approval, as they should not be engaging in the sale of consumer goods or services as a business in its own right."

That said, MAS is not offering the banks carte blanche.  They will be restricted from operating certain businesses such as property development.


My Thoughts:

DBS is trying to reposition itself from your friendly neighbourhood bank to a lifestyle enabler.  However, I wonder if this consumer-focused strategy might be setting up young adults for failure.

Picture this: (in a young man's head, surfing DBS website)


"Hmm... DBS offers really good fixed deposit rates.  But wait!  Oooh...  Isn't that blue Honda Vezel a beauty?  And it's only going for $70,000!  What's more, DBS is offering a car loan on the side, at a competitive rate of only 1.99%!  Should I just buy it, instead of parking my money earning lousy interest?"


Whatever the case, it is unlikely that DBS will gain any significant profit from this venture.  And I do not rule out the possibility that the lender may branch into the housing resale market too.  It will be a boon for shareholders if DBS can get its customers to linger more on its website, admiring  and arranging test drives for  the used cars.  There is always the sliver of a chance to sell him or her the additional car loan, at a competitive rate.


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