What is Digital Banking?
Digital banking refers to the use of digital technology to conduct banking activities, such as managing accounts, making payments, and transferring money. Unlike traditional banks, digital banks have moved most of their processes and services online, mainly through new platforms and mobile apps that can be accessed on most current mobile devices.
In the current Digital Banking framework of Singapore, the Monetary Authority of Singapore (MAS) is the regulatory government body in the banking industry, as well as the one that issues both the banking licenses and the digital banking licenses to institutions that wish to operate in Singapore.
Furthermore, the overall baking framework is the Banking Act of 1970 which also includes digital banks. In practice, the same regulations apply to banking institutions and digital banks in their respective categories. Nevertheless, there is a transition period from the time the institutions get the license granted to the moment they become fully operating, so this means they start their operations under some restrictions until a period of 3 to 5 years passes. The Monetary Authority of Singapore (MAS) will assess whether to remove this restriction.
Currently, there are only 2 types of licenses that allow institutions to operate with Digital Bank licenses in Singapore:
1. Digital Full Bank License (DFB)
This category allows an institution to provide deposit-taking services and other banking-related services, just as any other certified Full Bank Institution, such as savings accounts, investment products, and credits, simplifying access to the users. They can provide services to individuals which are often referred to as retail services, as well as other entities such as corporate clients.
Restrictions
- During its first years of operations, the amount of the deposit that it can receive will be capped at a total of $75,000 Singapore dollars per individual.
- After the restriction period, which could be from 1 to 2 years, these caps can be lifted by the Monetary Authority of Singapore (MAS).
2. Digital Wholesale Bank License (DWB)
This category allows an institution to focus mainly on providing services to Small and Medium Enterprises in Singapore, which are normally known as SMEs. Just like a Wholesale Bank, a Digital Bank with this license can provide the same services, which are lending services, deposit-taking, and other financial services specifically to companies. If an entity wishes to provide retail banking services, a permit or an approval process should be done with the regulating authority.
Restrictions
- There is no deposit cap for this kind of digital banking license since their customer base will be corporations and other entities.
- A digital wholesale bank is limited to the business scope that was registered in the application process for its license. If there is an intention to provide further services, a business expansion scope process needs to be done with the regulating authority.
Now that we have a better understanding of what a digital bank license allows an institution to operate in Singapore, we can move into the next section, in which we will show a list of the current digital bank operations in the country.
Which Banking Institutions Are Licensed As Digital Banks?
In this section, we have prepared a list of the licensed institutions that can operate in Singapore. We have divided them into the current two permitted categories for Digital Banks in Singapore:
Digital Full Banks (DFB)
- GXS Bank: started by the Grab Holdings Group, a Singapore-based technology company, specializing in deliveries through apps, and the Singapore Telecommunications company, known as Singtel, where one of the first participants to be granted a digital bank license in 2020. GXS bank is currently offering saving accounts to individuals as other services to corporate clients.
- Maribank: established by the Singaporean group of companies Sea Limited, it already offers some services through its apps' ecosystem. However, Maribank currently is operating on an invitation basis for acquiring new users. It also offers limited banking-related services.
- Trust Bank: this bank is backed up by the International Standard Chartered Bank and the group of Companies FairPrice. It is the only digital bank, owned by an international bank, in this list. Furthermore, there is a current partnership that allows the user of this digital bank to access the Standard Chartered ATM system as well as other traditional banking services.
Digital Wholesale Banks (DWB)
- ANEXT Bank: created by the Chinese group Ant, which is the financial branch of the conglomerate Alibaba Group, this digital bank is focused on cross-border transactions and solutions for SMEs in this area.
- Green Link Digital Bank: established by the group Greenland Financial Holdings and the logistic company Linklogis, both being Hong Kong-based, and Cooperative Equity Investment Fund Management Co. Ltd in Beijing, it will be focusing on providing solutions in the fields of supply chain management and logistics to SMEs while providing financing options and loans.
As we have seen in this section, companies other than banks that have a record or an already established online presence are coming up into the digital banking arena, creating an interesting environment that compliments itself with other non-banking services.
🔎 Note: More alternatives? Check out our reviews of fintechs in Singapore: Aspire, TranSwap, SingX, OFX and Volopay.
Conclusion
Banking solutions are just starting to diversify, and it is certain that in the years to come, more features and more benefits will be translated into the users, either individuals or businesses.
For startups and small businesses, these are alternatives to traditional banking that may require higher prerequisites to engage with them, therefore digital banks and other payment solutions are starting to pick up a faster phase due to the benefits and almost instant processes different from traditional banking institutions.
If you have a company incorporated in Hong Kong, Singapore, or BVI, consider opening a Virtual Business Account in Hong Kong to receive a hassle-free payment services experience and many essential benefits for your business.
