Singapore central bank to issue up to five new digital bank licences

OCBC, Citibank, DBS and UOB ATMs at Tang Plaza at Orchard Road in Singapore.OCBC, Citibank, DBS and UOB ATMs at Tang Plaza at Orchard Road in Singapore.

The Monetary Authority of Singapore (MAS) announced Friday it would issue up to five new digital bank licences, in a move opening the banking sector to non-bank players.

“The entry of new digital players will add diversity and help strengthen Singapore’s banking system in the digital economy of the future,” the MAS said.

“With innovative business models and strong digital capabilities, these players can cater to under-served segments of the market.  They will provide impetus for existing banks to continue enhancing the quality of their digital offerings,” it added.

The licences will include up to two digital full bank licences, allowing the holder to offer a wide range of financial services and take deposits from retail customers, the MAS said.

The digital full bank licences would be open to companies based in Singapore and controlled by Singaporeans, while foreign companies would be eligible if they form a joint venture with a Singapore company, the MAS said.

There would also be up to three digital wholesale bank licences allowing the holders to serve small-to-medium enterprises (SMEs) and other non-retail market segments, the MAS said. Those licences would be open to all companies, the statement said.

The five licences would be in addition to any digital banks the Singapore banks may establish under the existing internet-banking framework, which was introduced in 2000, the central bank said in a statement posted on its website.

Candidates for the licences may already be getting their ducks in a row.

Earlier this month, Reuters reported, citing people with knowledge of the process, that Southeast Asian ride-hailing startup Grab is exploring moving into banking in Singapore.

The MAS said it expected to invite applications in August, when it will provide more details on eligibility.

Tharman Shanmugaratnam, senior minister and chairman of MAS, had announced the measures at the 46th annual Dinner of the Association of Banks in Singapore Friday, the statement said.

Moody’s Investors Service has previously said it didn’t expect the fast growth of financial technology companies, or fintechs, in the 10-nation Association of Southeast Asian Nations (ASEAN) region would necessarily impact Singapore’s banks negatively.

That was despite the city-state attracting the largest number of fintech investments among ASEAN countries, Moody’s said in a report in mid-June.

“Singapore’s leading financial institutions have leapt ahead of their regional peers in investing in digitization. This will help them preserve their competitive edge even as technology and customer preferences evolve,” Moody’s said.

The ratings agency added that the three largest domestic banks, DBS, UOB and OCBC, have a “high degree of banking penetration,” which could limit the impact of fintechs’ entry into the market.

Outside of Singapore, DBS has introduced digital-only banks in India and Indonesia, while UOB has launched one in Thailand and plans to set others up in the region, Moody’s noted.

UOB was quick to indicate it was comfortable with the new licences.

“At UOB, we welcome the diversity that the new players may bring with the digital bank licences to be granted,” Wee Ee Cheong, deputy chairman and CEO of the bank, said in an emailed statement.

“UOB has been developing our digital capabilities to make banking simpler, smarter and safer for our customers, and to serve them seamlessly in the way they prefer – offline or online, physical or digital or a combination,” he added.

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