Singapore digital bank licences popular despite challenges
(9 January 2020 – Singapore) Singapore received 21 applications from consortiums and corporates for the five digital bank licenses made available by the financial regulator, the Monetary Authority of Singapore (MAS).
The MAS announced in 2019 that it would issue two digital/retail full bank and three digital wholesale/small business bank licenses. The move could allow technology and non-bank providers to challenge traditional incumbent majors including DBS and UOB.
Applicants included eCommerce, technology, telecommunications, crowdfunding and payment services companies the MAS confirmed. The regulator confirmed it will announce its final decision at the end of H1 2020 with the five final victors expected to commence operations by the end of H1 2021. Companies that have publicly disclosed their applications include Grab, Singtel, Razer and Alibaba’s Ant Financial.
There were 14 applicants for the three digital wholesale bank licenses that would allow companies to lend to SMEs who traditionally grapple with working capital constraints. Digital wholesale banks would be subjected to the same regulatory requirements as existing wholesale banks, which includes a paid-up capital of S$100 million.
Malaysia’s central bank is also reportedly set to issue up to five digital banking licenses to qualified applicants looking to conduct either conventional or Islamic banking businesses in the country.
"We don't think digital banks will have a huge impact on the Singapore banks. The terms of the full banking licence, deposit caps (at the start) and later the S$1.5 billion capital requirement, plus the need not to engage in value-destructive competition to gain market share add additional challenges” stated Nick Lord, Morgan Stanley Head of ASEAN research.
“As in other markets we don’t expect the entrance of new players to result in a ‘Big Bang’ but rather a general improvement in service availability, customer experience and pricing,” he said. “More than anything else this initiative reflects the Singapore government’s desire to keep pace with innovation and fintech developments elsewhere” commented EY Asia-Pacific Fintech and Payments Leader James Lloyd.