October 31, 2020

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Monetary Authority of Singapore Receive Diverse Range of Digital Banking Applications

Monetary Authority of Singapore Digital Banking Licence Applications

The Monetary Authority of Singapore (MAS) announced today that it has received 21 applications for digital bank licences as at the close of application on 31 December 2019. This includes 7 applications for the digital full bank licences, and 14 applications for the digital wholesale bank licences.

Diverse group of applicants for new digital bank licences

The new digital bank licences have attracted strong interest from a diverse group of applicants. These include e-commerce firms, technology and telecommunications companies, FinTechs (such as crowd-funding platforms and payment services providers) and financial institutions. The majority of applicants are consortiums, with entities seeking to combine their individual strengths to enhance the digital bank’s value proposition.

Singapore’s central bank will issue up to five digital banking licenses — two full bank licenses (DFB) and three wholesale bank licenses (DWB) to advance the banking sector liberalisation. Issuing the new digital bank licences is a significant initiative which will enable non-traditional banking organisations with strong value propositions and innovative digital business models to offer banking services. DFBs will be allowed to take retail deposits, while DWBs will focus on serving SMEs and other non-retail segments.

These new digital banks are in addition to any qualifying subsidiaries that Singapore bank groups may already establish under MAS’ existing regulatory framework for the purposes of operating new business models, including partnerships with non-bank players to conduct digital banking.

The major Southeast Asian ride-hailing company Grab confirmed plans to submit an application for a digital banking licence in Singapore. The licence would allow Grab to offer lending, deposits, and other financial services to both consumers and small- and medium-sized businesses. Grab has been diversifying its operations, with particular emphasis on financial services throughout the region.

Ant Financial Services and a consortium that includes Hong Kong-listed smartphone maker Xiaomi are among those who have also bid for digital bank licences in Singapore.

MAS will evaluate all eligible applications based on their value propositions including the innovative use of technology to serve customer needs, their ability to manage a prudent and sustainable digital banking business, and their contributions to Singapore’s financial centre.

MAS Assessment Criteria for Digital Banking Licence

Eligible applicants will then be assessed for the following:

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 consider the ability of the applicant to implement the proposal.

Ability to manage a prudent and sustainable digital banking business, including the level of understanding of key risks in a banking business, and strength of its regulatory compliance and risk management plans. MAS will also consider the reputation, track record, financial strength and commitment of the applicant’s shareholders.

Growth prospects and other contributions to Singapore’s financial centre, such as the jobs it will be bringing to Singapore, its commitment to develop the skills of the local workforce, the capabilities (including technology) it will be locating in Singapore, the headquarter functions it will be anchoring here as well as its regional expansion plans.

New competition could threaten Singapore’s legacy banks

As MAS has opened digital banking up to new contenders in the industry, the three leading banks in Singapore — DBS, OCBC, and United Overseas Bank — could face threats when new competition enters the market. Competition like Grab could make a dent it their market share with its well-established database and technological expertise.

Who has submitted their digital banking licence application?

Grab and Singtel have confirmed that they applied for a full digital bank licence. Grab will have 60% stake in this consortium whereas Singtel will have 40% stake.

As also mentioned previously, Alibaba Group’s fintech arm Ant Financial have also confirmed that they have applied for a wholesale digital bank license.

Internet group Sea, formerly known as Garena, is the first applicant to go solo in its bid for a digital full bank licence in Singapore.

Razer is leading a consortium consisting of Sheng Siong Holdings, FWD, LinkSure Global, Insignia Venture Partners and Carro in bid for a full digital bank license.

iFast Corporation confirmed that they have also applied a digital banking license with two Chinese partners namely — Yillion Group and Hande Group

The BEYOND consortium announced on Sunday their bid for a full digital banking license in Singapore which consists of V3 Group, EZ-Link, Far East Organisation, Singapore Business Federation, Sumitomo Insurance Co Ltd and Temasek’s subsidiary Heliconia Capital Management.

Supply chain finance company Sheng Ye Capital, financial conglomerate Phillip Capital and AI-focused fintech firm Advance AI’s announced that they are also bidding for a wholesale digital banking license in Singapore.

AMTD led consortium consisting of Xiaomi, SP Group and Funding Societies announced that they too are bidding for a digital wholesale banking license.

MAS will announce the successful applicants in June 2020. Successful applicants are expected to commence business by mid-2021.