Digital bank licenses impact on Singapore quantified
(5 July 2019 - Singapore) In issuing digital bank licences, what will the impact of digital banks be in Singapore and what potential risks should the market monitor closely?
Singapore has announced plans to issue up to five digital bank licenses to increase competition as it seeks to become a digital economy. The move is also part of a market liberalisation push that has taken place since 1999 and an extension of an existing internet banking framework that has allowed local banks to establish digital bank subsidiaries. Singapore has reaffirmed itself as a leading example of regulators collaborating with industry players, ecosystem partners, and potential entrants to the market to promote innovation and create choices for consumers.
The Singapore International Chamber of Commerce believes the impact of digital banking licences will be positive. The new digital banks will be innovative and will create more consumer choice adding a new dimension to banking in Singapore. Digital and non-digital banks will learn from one another. They will do so by competing, collaborating, and by partnering. We can expect a slew of interesting product offerings. With the Monetary Authority of Singapore (MAS) standing guard to protect a vital sector of our economy, you can be sure risks will be well managed and the new players well regulated. The MAS and all banks know you can't ignore technological advances. You must embrace them or face irrelevance.
“If successfully implemented, the digital banks regime will broaden the existing financial system in Singapore” stated PwC Singapore Executive Chairman Yeoh Oon Jin. “Niche customer pain points can be addressed in a sustainable manner through innovative technology platforms. An example is SMEs' demand for speedier and cheaper loans. With new players, consumer demands are likely to be responded to more quickly. Digital banks can also rapidly scale up to capitalise on further liberalisation of the sector in the ASEAN region.”
“However, there are risks. Fortunately, these risks have largely been factored into the evaluation criteria of these digital banks such as irresponsible pricing for short-term customer acquisition, unsustainable business models that leave customers stranded” he added.
“Singapore is at the forefront of digitalising its economy through its Smart Nation initiatives. Hence, the offering of new digital banking licences is not surprising given other countries have also issued such licences. Digital banks will rev up competition, and competition accelerates continuous improvements and upgrades, which ultimately benefits the consumers” said Maybank Singapore CEO John Lee.
“As a global leader in digital payments, PayPal sees the rise of digital banks as another major impetus in the nation's drive towards a more cashless society. Digital payment platforms have long empowered small business owners and freelancers to tap into cross-border opportunities. Similarly, digital banks will bring more economic opportunities for merchants. As for consumers, they will also have more choices when it comes to accessing financial services. This is a positive development, and we believe these new market participants will help build and grow the fintech ecosystem, enabling Singapore to become a smart nation” stated PayPal Singapore Country Manager Rakesh Krishnamuti.