THE humble safe deposit box, long taken for granted as a standard service provided by banks, is at something of a crossroads in Singapore.

A growing number of banks are cutting back on boxes, just as demand from the swelling ranks of wealthy Singaporeans is on the rise.

These boxes are increasingly expensive for banks to build and maintain, and they take up valuable space.

The cost to a bank of building and maintaining a secure vault with about 3,000 boxes of various sizes could easily add up to $1 million.

And as office rents in Singapore soar, businesses, including banks, have to scrutinise the way they use every square metre of space. They must examine whether the space could be used for more profitable services.

In fact, by the time the costs of security requirements like 24-hour surveillance are taken into account, this business could even be money-losing.

Customers typically pay an annual fee of a little more than $300, which banks maintain is not substantial when compared to the resources they set aside monthly to provide the service.

Now, new players outside the banking industry are emerging to take up any slack but not all customers are happy with the alternative.

Still, many in the banking world say the safe deposit business is more than just numbers and profits - it is a service based on trust and reputation.

'This is a heart business that goes beyond dollars and cents. We're not in it for the money,' said Mr Patrick Chew, OCBC's head of delivery for group consumer financial services.

The business is also one that has its roots deep in banking history. Banks have traditionally safeguarded customers' cash, jewellery, documents and other valuable items.

'We have had the very first safe deposit boxes ever since we established the Battery Road branch,' said Ms Ngo Min Ying, Standard Chartered's (Stanchart's) general manager for shared distribution.

Back then, people did not know where to keep their precious belongings, she said, and there were few alternatives for safe storage. So Stanchart, like many other banks, decided to provide customers with a means to store their physical assets conveniently.

But this business is a lean one with tight margins. 'It's not a profitable product for the bank,' said ABN Amro Singapore's head of bancassurance and deposits, Mr Deepak Khanna.

OCBC's Mr Chew added: 'Even if you make a small margin out of this, you have to consider the liability and the risks involved. It's a business that requires a lot of care and attention.'

Most banks typically require customers to hold at least $5,000 in a fixed deposit before they qualify for a safe deposit box. Even then, with demand outstripping supply, eligible customers often face long waiting lists - up to a year for the larger boxes, which are the most popular.

And though there are now various alternatives, such as the safe deposit box facilities in Jurong and Paya Lebar run by security company Cisco, customers still want their choice picks.

Earlier this year, some HSBC customers were upset by the closure of the bank's safe deposit boxes at the Ocean Building branch. Landlord Keppel Land wants to redevelop the site.

HSBC arranged a special tie-up with Cisco to offer customers the chance to use the security company's facilities at special rates, but some of the customers still had issues.

While the bank's safe deposit boxes were extra-large, measuring 40cm square and 50cm deep, and resembled huge cabinets, Cisco's largest safe deposit box measured only 25cm square and 60cm deep, and looked like a deep drawer.

The closure took a few thousand boxes out of the total stock of more than 100,000 boxes provided by banks in Singapore. That may seem insignificant in absolute terms, but the HSBC incident merely underscores a growing trend in which boxes are being closed due to space constraints.

As building refurbishments and renovations take place at banks, an increasing number of banks are cutting the number of boxes they offer.

Take DBS Bank, for example, whose safe deposit box numbers have dwindled by 30 per cent to 30,000 in the last two years, due to the closure of several existing buildings, which has affected branches such as Tampines and Siglap.

'Sometimes we're not able to get a big enough space that enables us to get a nice banking hall for our customers' convenience and also provide them with safe deposit boxes. Given these two demands, we normally make a choice, and sometimes the banking hall takes precedence,' said Ms Rachel Yap, DBS' managing director and head of business operations.

As to whether banks will reduce safe deposit box operations, most of them will reassure customers this is not going to happen.

Ms Yap said: 'In certain locations, we've had to shut down safe deposit boxes, but in areas where we can, we want to continue providing. It's not a service we'll cut down entirely because this is a service customers want.'

Bankers argue that in land-scarce Singapore, if no new boxes are being provided by the banks, then customers will have to look around for alternatives, even if they are less ideally located.

A $20 million high-security vault near Changi Airport, known as the Singapore FreePort security vault, will open next year. Then there is Cisco, though bank customers might be resistant to change, preferring to leave valuables with a bank regulated by the Banking Act, rather than a non-bank company.

Any sign that the demand for such boxes is abating has been thrown on its head, with the entry of a relatively untapped demographic group - the mass-affluent segment.

They are mainly well-educated professionals, in their early 30s, who want a safe place to keep their documents, such as birth certificates or insurance policies.

Ms Ngo of Stanchart has seen 10 to 15 per cent annual growth in the number of younger people using safe deposit boxes at its Battery Road and Scotts Mall branches over the past two years. 'With new customers being so young, I think this service will continue for a long while,' she said.

One long-time customer is Madam Phua Gek Kee, 75, who keeps the jewellery she bought with her hard-earned savings in a safe deposit box. She takes the jewellery out occasionally, to touch it and reminisce.

'It'll be troublesome if I don't have a box. I would have to keep my jewellery in a safe at home, but it might not be safe,' she said.

» Safety in numbers

DEPOSIT BOX RELOCATION
A safe move across Orchard Road for OCBC customers

IT STARTED with two months of frantic preparation and culminated in a month-long relocation exercise involving 50 OCBC Bank staff, assisted by Cisco guards working around the clock.

The aim was to help customers get the contents of about 4,000 safe deposit boxes from Specialists' Centre, which is due for redevelopment by the bank, to nearby Orchard Point.

The process started in April, with OCBC placing newspaper advertisements and sending letters to customers informing them that they could remove their belongings from May 2 to June 17.

To encourage customers to act fast, OCBC gave those who made the first move an 'early bird discount' on box rentals.

It was a fairly straightforward affair for those living near the city, but others who lived abroad had to fly in to move their valuables. Some Indonesian customers, to offset the inconvenience, incorporated this 'activity' into their weekend shopping itinerary.

Banking hours were extended, while Cisco guards helped people to escort their valuables.

'We didn't know what these items were, but we took great pains to ensure the process was smooth. At the end of the day, we have to make sure their valuables are protected,' said OCBC's head of delivery, Mr Patrick Chew. 'We provided creature comforts, additional seating at the old and new premises, with food and drinks.'

Mrs Jennifer Chan, in her early 50s, was among the early birds who came to move their belongings. The entire process took an hour. 'I don't think I ever felt unsafe,' said Mrs Chan, who keeps jewellery, insurance policies and title deeds in her safe box.

Orchard Point, a short distance across Orchard Road from Specialists' Centre, now stores more than 5,000 safe deposit boxes, more than at Specialists' Centre - a sign of the increase in demand.

People keep a wide range of items in the boxes, from cash to jewellery, marriage and educational certificates and title deeds. More unusual items would include historical books and precious photographs.

OCBC has more than 25,000 safe deposit boxes at 11 locations.

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