The Monetary of Singapore (MAS) announced that it is open to receiving applications for five new digital bank licences from non-bank organisations.
It said that keen applicants have until the end of the year, Dec 31 to send in their applications.
It will be announcing the names of successful applicants in the mid of next year, following which successful applicants will have to start the business by the mid-2021.
Applicants will need to have a track record of at least three years of having a current business in the technology or e-commerce fields.
They must provide specific clear value propositions on their solutions to meeting the needs of the Singapore market which have not been attended to.
This would require them to have business models which differ from those currently employed by banks.
Applicants will also need to have a sustainable business model that indicates a track and potential of profitability while having a practical plan for exit.
As part of the applicant group, there should be at least one individual who holds a minimum 20 per cent stake or has at least a 20 per cent voting power in the potential digital bank.
Experts have said that this initiative will ease restrictions on the banking industry, allowing fintech companies to become full-fledged banks.
Up to two of the five licence holders will be able to transition to digital full-fledged banks. They will be able to provide financial services and accept deposits from retail and non-retail customers.
These banks will be restricted and will have to make a paid-up capital of minimum S$15 million and will have to make an aggregate deposit cap of S$50 million. Deposits per individual will be capped at S$75,000.
The banks will operate in this manner for about one to two years, following which the deposit cap and minimum paid-up capital will be raised over time.
Upon reaching the minimum paid-up capital of S$1.5 billion, it will become a full-fledged bank. All deposit caps will be taken away from here on.
Regardless of their status as a full-fledged bank or not, the banks are allowed only one physical place of business to operate in and will not be granted access to a network of ATMs or cash deposit machines.
They will, however, offer cashback services via electronic funds transfer at point of sale (EFTPOS) terminals at retail spots.
Full-fledged banks must have Singapore as their hub and be managed by Singaporeans. Foreign businesses can only be allowed unless they have made a joint venture with a Singaporean company and that the venture is under the control of a Singaporean.
The three other successful applicants out of the five licences will become digital wholesale banks. They will serve small and medium enterprises and other non-retail areas.
Companies such as Grab and Singtel have conveyed their interest in applying.
The entering of non-bank firms into the industry could stir apprehensions amongst banks currently dominating the market.
