Singapore is a major financial hub with over 1 million people working in its financial sector. The city-state’s economy is mainly driven by services and trade. It also has significant manufacturing industries including electronics, pharmaceuticals, chemicals, and textiles.
As such, there is a large demand for digital-first platforms, and the most recent evolution of this demand is the awarding of digital banking licenses.
We'll review briefly the 4 new digital players in the banking scene in Singapore.
Reviewing the new digital banking license
The Monetary Authority of Singapore (MAS) has announced that it has awarded four new digital bank licenses at the end of 2020. Two of which are Digital Full Bank licenses, and another 2 as Digital Wholesale Bank Licenses
Here's a breakdown of what makes the two digital banking licenses different:
|Digital Full Bank (DFB)||Digital Wholesale Bank (DWB)|
|Serves retail customers, with a deposit cap of $75,000 for each individual||Serves small and medium-sized enterprises (SMEs) and other non-retail segments|
|Starts as aRestricted Digital Full Bank in Singapore and offer simple credit and investment products||Opens and maintain deposit accounts for businesses|
While the licenses were awarded in 2020, there are still required approvals from the MAS which will likely mean the companies cannot conduct banking business until around 2022.
These new digital banks include:
Digital Full Bank Licensed
1. Singtel & Grab
2. Sea Limited
Digital Wholesale Licensed
3. Ant Financial
4. Greenland Financial Holdings
Singtel & Grab
This would be the first full-service digital bank licensed in Singapore. It will offer retail and corporate banking products while focusing on mobile payments and lending.
It was formed through a merger between Singtel's existing consumer business and Grab, an online food delivery platform.
Grab, founded in 2009, is one of the largest ride-hailing companies in Southeast Asia. In 2018, Grab had more than 5 million monthly active riders across its app. The company has been slowly encroaching on the Financial sector for some time, offering small financing options until it's come to terms with MAS oversight leading to the digital banking license application.
Sea Limited is a wholly-owned subsidiary of Temasek Holdings. It is the second Digital Full Bank licensed company in Singapore. Its main focus is to provide financing solutions for SMEs.
Sea Limited is also the parent company to subsidiaries like Shoppee, Garena, and SeaMoney.
While the entire holding company of Sea Limited was warded the Digital Full Banking license, it is unclear which of its subsidiaries will be holding the banner of its banking endeavors.
Ant Financial is one of the Digital Wholesale Bank licensed entities in Singapore, awarded in 2020. Its main business is to provide financial services to small and medium enterprises both in and out of Singapore.
In addition to providing loans, credit cards, and payment processing, it offers various other financial services like wealth management, investment advisory, and insurance.
Greenland Financial Holdings Ltd
Greenland Financial Holdings is a fully owned subsidiary of Greenland Holdings Pte Ltd. It is the second Digital Wholesale Bank licensed company in Singapore.
It focuses on providing financial services to individuals and SMEs in Indonesia.
How are the digital bank license winners chosen?
The process of selecting the winning applicants began back in May 2019 when the MAS published the Request For Proposals (RFP). Applicants were asked to submit their proposals by September 30th, 2019.
After receiving the proposals, the MAS conducted due diligence before issuing the RFPs for further evaluation.
The final selection was made based on the following criteria:
- The applicant must have a minimum net worth of $100M USD or SGD$200M SGD;
- The applicant’s core business must not overlap with any other entity already approved for a similar license;
- The applicant must demonstrate strong commitment to customer service and compliance;
- The applicant should show evidence of having sufficient capital to support operations during the initial phase of operation;
- The applicant should have a proven track record of success in the relevant industry;
- The applicant's proposed business model should align with the objectives of the licensing framework;
- The applicant shall comply with all applicable laws and regulations, including those related to money laundering and terrorist financing;
- The applicant may only hold licenses that do not involve activities prohibited under the Money Laundering Act, the Proceeds of Crime Act, and the Terrorism Financing Act;
- The applicant is subject to approval by the Monetary Authority of Singapore.
What does this mean for consumers?
Singaporeans can expect to see a lot of changes in how they access banking services as these new banks enter the market.
Some of the major changes include:
- Accessing accounts at multiple banks via mobile applications instead of visiting physical branches;
- A greater number of products available from each bank;
- More competitive interest rates offered by the banks;
- Better customer service and more personalized experience;
- Lower fees charged by the banks;
- Faster transactions.
SMEs also stand to benefit
Small and Medium Enterprises will be able to take advantage of lower costs incurred by using online channels such as mobile apps and internet banking.
They will also get better access to finance through innovative solutions that cater to their needs.
For example, they can use digital platforms to manage cash flow and borrow funds at competitive rates. They can also get advice on managing their finances and find ways to improve their businesses.
Are there any downsides?
There are some concerns about whether the new entrants will be able to compete effectively against the existing players in the market.
However, the MAS has taken steps to ensure that competition remains fair.
For instance, the MAS has set up an independent review panel to monitor the performance of the new entrants over time. This ensures that the new entrants are held accountable if they fail to perform well.
In addition, the MAS has been very transparent about its decision-making processes so that the public can understand why certain applicants were selected and others weren't.
It has also provided a detailed explanation of the rationale behind its decisions.
This helps to build trust among consumers and stakeholders alike.
What are some of the most successful digital banks globally?
The following are examples of digital banks which have successfully established themselves in different markets around the world:
- First Global Bank (FGB): Founded in Hong Kong in 1994, FGB is one of the largest international banks in Asia. It offers a range of financial products and services to individuals, small and medium enterprises, and corporations.
- Monzo: Launched in 2012, Monzo is a UK-based digital bank offering customers a simple way to save, spend and borrow money. Customers can choose between a basic account or a premium account.
- N26: Founded in Germany in 2013, N26 provides a full suite of personal banking services to individuals and SMEs. Its core product is a mobile app that allows users to view their balances, make payments and transfer money.
- Simple: Founded in 2007, Simple is a US-based digital bank with a focus on simplicity and transparency. It offers three types of accounts - Basic, Premium, and Business.
- Starling Bank: A subsidiary of BBVA, Starling was founded in 2016 and is based in London. Starling's mission is to provide a simple and accessible banking solution.
Other Digital Banking Alternatives
If you're an SME looking for digital payment solutions, consider using alternatives to licensed digital banking institutions with options like Statrys.
Open a business account in Hong Kong (and coming soon to Singapore), get full foreign exchange services like Spot and Forward contracts, local Euro IBAN accounts, and more.