Singapore will begin taking applications from August. The move follows closely in the footsteps of Hong Kong, which has issued eight virtual banking licenses so far.
The five virtual bank licensees, which would comprise up to two for digital full-bank and up to three for the digital wholesale bank, must all meet the same capital requirements as local banks, Monetary Authority of Singapore (MAS) announced last Friday.
«The new digital bank licenses mark the next chapter in Singapore's banking liberalization journey,» said Senior Minister Tharman Shanmugaratnam, chairman of the MAS at the annual Association of Banks in Singapore (ABS) dinner. «I am confident that (the local banks) will hold their own against the new competition.»
Healthy Competition Expected
The new licenses are not designed to be «value destructive» to local banking system, Shanmugaratnam noted. «The entry of new digital players will add diversity and help strengthen Singapore’s banking system in the digital economy of the future. With innovative business models and strong digital capabilities, these players can cater to under-served segments of the market,» MAS said in its media statement.
Still, experts say this could herald a new era of competition for Singapore and Hong Kong banks dominant in retail banking. HSBC in Hong Kong, who chose not to apply for the virtual banking license there, has responded to upcoming competition from virtual banks by announcing it is scrapping fall-below fees and other associated fees, as reported by finews.asia earlier. In Singapore, DBS and UOB currently charge S$2 if the Minimum Average Daily Balance (MADB) is $500 or $1000, depending on the time the account is open. At Standard Chartered, the fall below fee is S$5 for its e$aver account if the MADB is S$1,000.
Requirements To Apply
Applications for the digital full-bank licenses are open to companies headquartered and controlled by Singaporeans. Foreign companies can apply for these full-bank licenses if they form a joint venture with a Singapore company. MAS will look at the financial projections from the applicants such as cost-to-income ratio, and projected net interest margin.
Similar to the framework in Hong Kong, applicants must have a track record in operating an existing business, or in technology and e-commerce fields. They must also show clearly how they can tackle unmet needs, and show they have a sustainable digital banking business model.
Differentiating Experiences the Key
«At UOB, we welcome the diversity that the new players may bring with the digital bank licences to be granted. Banking will continue to be shaped by how financial service providers ensure customers’ interests are not only anticipated, met and protected but that their experiences are also differentiated,» said Wee Ee Cheong, Deputy Chairman, and chief executive of UOB, in a media statement in response to the issuance of new licenses.
«Underpinning our omni-channel engagement is our open-loop approach to collaborating with like-minded ecosystem partners, including technology companies, to provide best-in-class solutions that meet the evolving needs of our customers,» Wee added.
