Singapore has five categories of institutions - Full banks, Qualified Fully Banks, Wholesale Banks, Merchant Banks, and Financial Institutions.
There are multiple things to consider before opening a business bank account. The main three are the type of business account, the minimum monthly balance, and the initial deposit amount.
Singapore is famous for its robust financial system and its dynamic business environment. It is no wonder why it is a preferred choice for international companies to set up their headquarters in the Asia Pacific region. Additionally, its diversified banking system has attracted major banks worldwide, enhancing the international commerce between Singapore, Southeast Asia, and the world.
Now, with such a wide offer of banking services from different institutions, local and international, how can an entrepreneur or an international business person choose the best business account to cover their needs? This article will answer this question and share other considerations about Singapore's banking system. But first, let's have a quick review of the banking legislation.
Banking Legislation in Singapore
In Singapore, the Banking Act of 1970 is the governing legislation that regulates the licensing of banking institutions in the country. The Monetary Authority of Singapore (MAS) is the government organisation that enforces this regulation and grants licenses to local banks and branches of international banks to operate in Singapore.
According to the Regulating Authority, there are five categories of institutions that take deposits, these are the following:
- Full banks: these institutions can offer a wide range of financial services, such as insurance, capital and brokerage, financial advisory services, as well as opening accounts, taking deposits, and lending services. Local banks have different requirements from the branches of international banks.
- Qualified Fully Bank (QFB): in the case of foreign banks, this distinction allows them to have a more relaxed approach when dealing with local banks for certain debit services, as well as the relocation of their branches.
- Wholesale banks: banks that fall under this category can carry out the same banking activities as full banks. However, they do not engage in banking that involves retail activities for individuals, only for businesses. Additionally, there is a prohibition on realising non-financial activities, such as financial advisory services.
- Merchants banks: This bank category can perform limited activities with a person in Singapore or elsewhere. These are deposit-taking activities and banking activities. Any other activity outside the mentioned scope is not permitted.
- Financial Institutions: A financial institution follows regulations different from the Banking Act. The regulation that governs this institution is the Finance Companies Act. Moreover, the activities allowed by this institution fall under two sections: deposit-taking activities and lending activities to individuals and small and medium companies.
📖 Read more on the list of the top 5 best business bank accounts in Singapore
What is a Business Bank Account?
Normally known as a corporate bank account, or in simple terms, a business account, it is a kind of account solely used to separate your business's transactions. In this sense, you can keep a better record of the cash flow generated from your business and the expenses generated from the operations; this means the incomes and outcomes of money.
It is important to mention that from an accounting perspective and to reduce legal liability, it is always advisable to operate a business through its account rather than through a personal account since some conflict could arise between the bank user terms and the account user. A banking institution has the right to suspend its services at any point if there is suspicion of malpractice from the users.
Now that we have a clearer idea of what a business account is, we should discuss some of the considerations that should be considered when choosing a banking institution that will provide corporate bank account services for your company. More details will be shown below.
What to Consider Before Choosing a Business Account
As we have mentioned at the beginning of the article, there are multiple service providers for bank accounts in Singapore. Nevertheless, it is important to mention some general aspects before becoming a client with a specific bank. Here, we will enlist some of our thoughts and considerations:
- Types of business accounts: Some banks have different requirements and services that adjust better for a specific type or size of a company. For example, the OCBC business growth account is specifically tailored for startups or new businesses.
- Minimum monthly balance: Some bank accounts require a minimum monthly balance. If the account balance goes down from this requirement, there might be charges for using the account until the minimum balance is restored. Examples of some questions you should ask: How much is the cash balance that you need to maintain in the bank account in order to avoid the monthly fall-below fee
- Minimum initial deposit: As part of the opening process, some banks require an initial deposit to activate the account. Depending on the institution, this fee might be used as part of the application process and can be deemed as not refundable if the opening application fails. Examples of some questions you should ask: What is the minimum initial deposit amount required by the bank in order to open a business bank account?
- Business multi-currency account: Being an internal centre of commerce, banks in Singapore normally offer multiple currency accounts, some of them with a wider variety. For example, the DBS business multi-currency account is offered by DBS bank with access to 13 major currencies. Examples of some questions you should ask: Do you need to support multi-currency transactions? If so, does the business bank account support it?
- Internet banking: Online banking has caught up with most banks in Singapore. Since English is one of the official languages in Singapore, the language barrier won't be a problem, and the banking applications and the web platforms are quite user-friendly. Examples of some questions you should ask: What digital banking features that are available will allow you to do transactions easily?
- Monthly account fees and transaction fees: Depending on the chosen account and the institution, there might be additional charges according to the use and maintenance of the account. Some banks charge monthly fees to keep up the account. Additionally, there might be some charges for transfers to other accounts. Examples of some questions you should ask: What monthly charges will you incur from the bank to keep your account?
- Perks of corporate bank accounts: As part of the benefits of opening business banking accounts, some banks might grant individuals related to the company a business debit card or even a business credit card that can be used internationally.
- Information disclosure: As part of the process of opening the bank account, some information might need to be disclosed to the bank authorities, such as identity documents and address proof of the people who own the company, the directors, and in the case that the owners are a corporate entity, the ultimate beneficial owners, as well as documents supporting the transactions of the parent company. Additionally, some of the people involved might need to be ready to travel to Singapore for the bank interview process, which, in most cases, is a must.
Virtual Banks in Singapore
Consider using virtual banks in Singapore, which exclusively operate through online platforms without physical branches. These banks leverage advanced technology to deliver banking services via websites and mobile applications.
Digital banks generally offer cost-effective solutions due to their absence of traditional overheads. This cost efficiency enables them to provide reduced fees and enhanced features, emphasising user-friendly experiences and swift setup procedures. Some virtual banks even integrate sophisticated technologies such as artificial intelligence.
While virtual banks may not have achieved the same level of recognition as their traditional counterparts, they aim to appeal to individuals seeking convenient, technology-driven, and economical banking solutions in the digital era.
Maribank is a novel online banking initiative launched by Sea Group. As the latest entrant, it is closely affiliated with Shopee, offering significant advantages for Shopee users.
Backed by Standard Chartered and FairPrice Group, Trust Bank has introduced a savings account and two additional products—an accident insurance plan and a new NTUC Linkpoints card. The latter is designed to replace the outdated OCBC NTUC Plus! Visa Credit Card.
All interactions with Trust Bank are facilitated through the "Trust App", available for download from the Google Play Store or Apple App Store.
💡 Tip: Read our guide when you are ready to open a bank account in Singapore.
As we have seen in this article, there are many factors to consider when choosing a banking institution or a financial platform that can help you fulfil the needs of your business. Different banks have different features. Some highly sought-after features are ease of customer payments, digital banking, issuing e-invoices, managing cash flow, and getting business financing. As such, it is not rare to see established businesses switching business bank accounts.
Luckily, Singapore is the perfect location to take the time to evaluate all the services offered by the different institutions located in the country. Furthermore, thanks to its business-friendly policies, entrepreneurs and startups can explore accounts tailored to their needs with low requirements and fees.
Opening a bank account can be a lengthy and time-consuming process, so it is important to make an informed decision when choosing a bank as a partner. It is always advisable to research and reach out to experts who can help you make this important decision for your business.
What is a Business Bank Account, and why do I need one?
A Business Bank Account, also known as a corporate account, is specifically designed to manage your business's financial transactions separately from personal finances. It's crucial for legal liability, accurate record-keeping, and overall financial management.
What are the different types of banking institutions in Singapore?
What should I consider before choosing a business account?
What documents and information are typically required to open a business bank account in Singapore?