Singapore Sees ‘Strong Interest’ in Digital Bank Licenses
(Bloomberg) -- Follow Bloomberg on LINE messenger for all the business news and analysis you need.
Singapore has received “strong interest” in its effort to open up the banking industry to fresh competition after 21 groups made bids for digital licenses, the financial regulator said.
A “diverse group” lodged applications, including e-commerce, technology and telecommunications companies, the Monetary Authority of Singapore said in a statement on Tuesday, without identifying the parties. Seven were for digital full-bank licenses, and 14 were for wholesale permits, it said.
Some bidders see the city-state as a gateway to the rest of Southeast Asia, where the digital lending market is expected to quadruple over the next five years. Neighboring Malaysia said last month it’s working on a framework for virtual banks.
Firms including Jack Ma’s Ant Financial, Grab Holdings Inc. and Razer Inc. are among companies that have registered their interest with the MAS, which plans to announce winners in June. The successful groups are expected to start business by mid-2021, going up against established local and global names including DBS Group Holdings Ltd. and Citigroup Inc.
The MAS said last June it plans to issue as many as five new digital bank licenses to non-banks to strengthen competition. The U.K. and Hong Kong are among major economies that have already issued similar permits, creating a new generation of rivals for traditional lenders.
The number of interested parties is high given the limited availability of the Singapore permits, said Varun Mittal, an associate partner with the consultancy firm EY in Singapore, comparing the numbers to Hong Kong, which awarded eight licenses last year from 33 applications.
Once new players get a foothold in Singapore they can demonstrate a track record to other regulators in Southeast Asia when those markets open up to digital banks, Mittal said. Still, the challenge will be demonstrating profitability over the long run.
“One key thing to note is long-term sustainability and viability of new digital banks since globally a large proportion of them have yet to become profitable,” he said. “In the event of an economic downturn, new digital banks could face operational challenges.”
Singapore Telecommunications Ltd. and ride-hailing company Grab see demand from small businesses and individuals seeking cheaper and improved banking services, executives from the firms said late last month. Gaming company Razer plans to target younger customers including millennials. Both groups are applying for full digital banking licenses.
The MAS plans to award up to two full licenses, which will require total capital of S$1.5 billion ($1.1 billion) and must be controlled by Singaporeans. Recipients will be allowed to provide a range of financial services as well as take deposits from retail customers.
There are up to three digital wholesale permits on offer, which are limited to serving corporate clients and require a minimum S$100 million of capital. They are open to both local and foreign applicants.
Southeast Asia’s digital lending market may reach $110 billion by 2025, according to a report by Bain & Co., Google and Temasek Holdings Pte.
©2020 Bloomberg L.P.