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Singapore digital bank licence applicants must make strong case

The Monetary Authority of Singapore (MAS) building in Singapore. (PHOTO: Roslan Rahman/AFP/Getty Images)

By Abdul Hadhi

SINGAPORE — Five digital banking licences are up for grabs in Singapore but more than double that number have indicated interest, with non-banking players outnumbering traditional operators, market watchers say.

As the Monetary Authority of Singapore (MAS) has only set out a framework and requirements, those interested will have to argue their cases and “who will ultimately get the digital bank licences will depend very strongly on how they can serve customers, and where and how Singapore can benefit from a labour and local business standpoint,” CIMB economist Song Seng Wun said.

The regulator’s move to invite applications followed MAS chairman and senior minister Tharman Shanmugaratnam’s announcement in late June that Singapore would issue up to five digital bank licenses, including up to two full digital bank licences to companies headquartered in Singapore, and up to three digital wholesale bank licences.

MAS expects to award the licences in mid-2020, and allow the new operations to start mid-2021.

Among the earliest to show interest was gaming equipment maker Razer, whose value proposition is catering to underserved markets and meeting unmet financial needs, a criteria set by MAS for prospective applicants.

Razer Fintech CEO Jasmine Ng said that youth and millennials form one such segment. “Given that we are already processing billions of dollars in digital payments and are one of the biggest global brands for youth and millennials in the world, we believe we are well suited to meet the requirements at this time,” she said.

Another non-bank operator which has expressed interest – remittance firm InstaReM – expects its value to be its expertise in cross-border money transactions while another potential applicant, cryptobank Sygnum, is looking to offer digital asset management services. Digital assets include Bitcoin and Ethereum.

Ride-hailing firm Grab – backed by Japan’s Softbank – is also keen to apply, a spokesperson said.

Others that have reportedly shown interest in applying for a digital banking licence include peer-to-peer lender Validus Capital, e-wallet operators Liquid Group and MatchMove Pay, and OneConnect, the fintech arm of China insurance giant Ping An.

Traditional players in the mix include Standard Chartered Bank, Maybank and OCBC, which might partner with telco SingTel.

Tie-ups may be the way forward for applicants

While there have been no confirmed tie-ups, Fitch Ratings said in a report that the new licences are likely to create partnership opportunities between banks, non-bank financial institutions, fintechs and even corporates.

“These tie-ups could eventually enhance incumbents' franchises through cross-selling and by leveraging each partner's digital platforms and capabilities. We see minimal downside risk to incumbent banks' profitability as these tie-ups would be likely to lead to more measured competition, albeit with some additional costs in the form of potential duplication, capital investment and management attention,” the ratings agency said.

While the aim is to make banking more innovative and efficient, Singapore wants to achieve this through gradual integration rather than overnight transformation and as such, integration and scalability are key factors the authorities are likely to consider based on the eligibility criteria, according to Hagen Rooke, counsel at Reed Smith Resource Law Alliance.

On integration, Rooke said the applicant’s “service proposition must not unduly disrupt the existing banking sector, but must be novel and innovative”. He added that the onus will be on applicants to demonstrate they will meet MAS’ expectations.

Scalability comes in as new players may not have same resources as large incumbents, and the digital banking regime can operate as an accelerator or incubator, he added. Applicants for a full digital bank licence will need to undergo a period of restricted business but with lighter regulatory requirements before graduating to unrestricted status.

Fitch Ratings expects that the new additions will bring a new dynamism to Singapore’s banking system with previously underserved markets getting better access to credit, as banks access non-traditional data to reach a broader range of customers.


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