Enhancing Deposit Security: Understanding the Deposit Locking Feature in Singapore

I recently came across an article that shed light on a concerning issue and its seemingly simplistic solution – the Deposit Locking Feature in Singapore. The juxtaposition of the problem and its remedy left me both shocked and disappointed.

The problem at hand is twofold: individuals holding significant deposits in Singapore banks are increasingly falling victim to scams and phishing attacks, resulting in irrecoverable losses. The solution proposed by banks? A feature to lock your deposits, offering lower interest rates and introducing inconveniences such as requiring physical presence and identification for withdrawals. The magnitude of this issue became evident when, just a month ago, SGD $5.4 billion worth of deposits were already locked in the program across major banks like DBS, OCBC, and UOB.

Here are the critical concerns that have been weighing heavily on my mind:

1. ‍Distinguishing Currency from Money: It's essential to recognize the difference. While currency, issued by governments, serves as a medium of exchange, true money serves both as a medium of exchange and a store of value. Unfortunately, many people are unknowingly holding onto currency rather than money, with bank deposits offering little to no protection against inflation.‍
2. Limited Deposit Insurance: Bank deposits are only insured by the SDIC up to SGD $100,000 per account holder per bank, leaving substantial amounts vulnerable to loss.‍
3. Increasing Inconvenience as a Solution: In today's technological age, escalating inconveniences do not equate to effective solutions. Rather, they seem to serve as a tactic to lock deposits, enabling banks to leverage these funds for their own gains.

As a provider of treasury management automation solutions, we perceive this problem from both the business and individual perspectives. The real solution should address several crucial elements:

1. ‍Yield Generation: Is the investment yielding returns sufficient to counteract inflation? Money markets present an efficient option with low costs, high liquidity, and ease of movement.‍
2. Safety of Holdings: Investments in money markets are typically backed by government T-Bills, offering AAA+ security. Regulatory safeguards ensure that assets are protected by custodians, providing greater security beyond insurance limits.‍
3. Liquidity: The ability to access funds easily is paramount. While bank accounts offer instant access, alternative options like money markets typically require minimal lead time for withdrawals, often with digital-enabled platforms for convenience.  Ironically, the banks are introducing physical safeguards and delays into their withdrawal process as an option, negating their advantage in this area.‍
4. Security Against Scams: Maintaining separate bank and investment accounts adds an extra layer of security. Regulations mandate withdrawals only to accounts with matching names, making it significantly harder for scammers to exploit.

Extrapolating MAS statistics from 2023, Singapore SMEs hold approximately SGD $497 billion in bank deposits, representing a significant opportunity cost in lost interest (approx SGD $14.5B). It's imperative for everyone to reassess their deposit strategies and reclaim what essentially amounts to "free" money back from the banks through proactive measures.

CashWise stands as a Robo-Treasury solution for businesses, optimizing cash flows to maximize returns on idle cash. In an era of rapid advancements, you need an automation solution capable of managing cash flows reliably and predictably on a 24x7 basis.  Come join us in the automation revolution!  Please do reach out to have a chat!

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Reference: March 20, 2024, CNA: More banks in Singapore offer money lock feature