Why does Singapore want more retail and wholesale digital banks?

DIGITAL banks make life convenient for customers through interesting products, solutions, and features.

It’s why they’ve been able to capture the attention regulators in countries such as Singapore, Hong Kong, Malaysia, China, as well as Australia.

Most recently, the Monetary Authority of Singapore (MAS) announced that it will be accepting applications for five new digital banks until the end of this year and will grant licenses by mid-2020.

The MAS expects the new entities — non-bank organizations — to start offering services to customers by 2021, providing better support and solutions to the people of Singapore.

Full digital bank license holders will be allowed to accept deposits from and provide a wide range of financial services to retail and non-retail customer segments, while digital wholesale banks will be permitted to serve SMEs and other non-retail segments.

These new digital banks are in addition to any digital banks that Singapore banking groups may already establish under MAS’ existing regulatory framework.

Although it sounds like the MAS is going the extra mile to make it easy for almost anyone to apply for a digital banking license, the assessment criteria set by the regulator are in line with the high standards that people have come to expect from it.

Applicants must first meet the eligibility criteria for business track record, fit and proper shareholders, directors and management, capital commitment, a clear value proposition, and a sustainable business model, to be considered.

Further, applicants for the full digital bank license must be anchored in Singapore, controlled by Singaporeans, and headquartered in Singapore.

During the assessment, the MAS will also be placing an emphasis on the value proposition of the applicant’s business model, incorporating the innovative use of technology to serve customer needs and reach under-served segments of the Singapore market that differentiates it from existing banks.

MAS will also, of course, consider the ability of applicants to implement their proposals.

“The new digital bank licenses mark the next chapter in Singapore’s banking liberalization journey. They will ensure that Singapore’s banking sector continues to be resilient, competitive and vibrant,” said MAS Chairman and Senior Minister Tharman Shanmugaratnam recently.

According to MAS, the new digital banks will also be expected to make contributions to Singapore’s financial center, bringing jobs to the country, committing to develop the skills of the local workforce, and bringing new capabilities (including technology) to the country.

“Over the next decade, we will see more changes in the banking industry than we have witnessed in the past 100 years. This isn’t solely due to advancing technologies, but a confluence of inter-related, structural factors – demographic, socio-economic, regulatory and environmental changes,” claimed a recent report.

New digital banks will not only help Singapore ensure the vibrancy of its financial services landscape but also help facilitate the digitization of the economy as a result of the support digital banks provide.

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