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Singapore to issue up to five digital banking licences

By Asia Asset Management  
Jul 3, 2019

Singapore’s central bank will issue as many as five digital banking licences as part of its plan to liberalise the banking industry in the city state.

These are in addition to any digital banks that may be set up by banking groups under the existing Internet banking framework that was introduced 19 years ago, the Monetary Authority of Singapore (MAS) says in a statement on June 28.

"The move announced today extends digital bank licences to non-bank players," MAS says.

There will be a maximum of two full digital banking licences and three wholesale licences. The former, which is limited to Singapore-controlled companies, will allow licence-holders to provide a wide range of services, including taking deposits from retail customers, which is prohibited by the wholesale licence. Wholesale banking licence-holders can only serve small and medium enterprises and other non-retail customers.

MAS Chairman Tharman Shanmugaratnam says the new digital banks will help cater to “under-served segments”. He describes the planned issuance of licences as the "next chapter in Singapore's banking liberalisation journey".

"They will ensure that Singapore's banking sector continues to be resilient, competitive and vibrant," he says in the statement. "They will provide impetus for existing banks to continue enhancing the quality of their digital offerings.”

Companies that apply for the full licences must be headquartered in Singapore and controlled by Singaporeans. Applications for the wholesale licences are open to all companies.

The regulator says it expects to open applications in August, and will provide more details on eligibility and admission criteria at that time.

According to a fund manager at a Malaysian asset management company, the effectiveness of MAS’s move will depend on the kind of companies that win the licences.

"If the recipient already has a huge customer base, such as a retail company or a ride-hailing operator, then it will definitely give the incumbents a run for their money," he tells Asia Asset Management, speaking on condition of anonymity.

Japan was one of the earliest in Asia to introduce digital banks, in 2001, and more regulators in the region are beginning to warm up to the idea.

The central bank of Malaysia, Singapore’s closest neighbour in Southeast Asia, has said it will release a digital banking framework by the end of this year.

Hong Kong issued its first batch of digital banking licences to three companies this March. China awarded its first licence in 2014 and now has five digital banks.