Singapore to Issue New Digital Banking Licenses to Non-Banks
Banks worldwide face increasing competition from technology firms that are getting into financial services.
(Bloomberg) -- Singapore will issue as many as five new digital bank licenses to non-bank firms as the island nation seeks to strengthen competition in financial services, according to one of its top regulators.
“We welcome firms with innovative value propositions to apply for the new digital bank licenses, even if they have not yet established a track record in banking,” Monetary Authority of Singapore Chairman Tharman Shanmugaratnam said in a speech at the annual banking industry dinner on Friday. At the same time, the regulator “will not allow value-destructive competition to the detriment of long-term financial system stability,” he said.
Banks worldwide face increasing competition from technology firms that are getting into financial services including payments and lending. The U.K. and Hong Kong are among major economies that have allowed licenses for virtual banks, creating a new generation of rivals for traditional lenders.
Singapore Telecommunications Ltd., Grab and Razer Inc. said they would consider this opportunity.
“Having ventured into mobile financial services, these are interesting developments,” Singtel said in a statement. “We are open to exploring the feasibility of such an opportunity and will be reviewing the licensing conditions.”
Gaming Company
Gaming company Razer already processes digital payments and has an e-wallet service in Malaysia with a Singapore app coming soon.
“We will definitely consider applying for the digital bank license and are keen to help spur innovation in Singapore’s financial sector, ” Limeng Lee, chief strategy officer at Razer, said in a statement.
Grab, Singapore’s ride-hailing giant, will study the digibank licensing requirements closely, said Reuben Lai, Grab Financial Group’s senior managing director. The company will keep an open mind as to how best to pursue this, including whether to work with suitable partners, he said.
Digital banking isn’t new in Singapore, where the regulator has allowed local lenders to pursue online-only business models since 2000. DBS Group Holdings Ltd. and United Overseas Bank Ltd., both based in the city-state, also operate digital banks in other Asian countries including India and Thailand.
Equal Terms
DBS Chief Executive Officer Piyush Gupta has said he would only see a problem in Singapore if virtual banks were allowed to operate on more lenient terms than the incumbents, for example if their capital requirements were lower, according to an interview in May.
The MAS will invite applications from non-banks in August for the five digital banking licenses. “We will also ensure that digital banks will compete with incumbents on a level playing field,” Tharman said.
The MAS set two categories for digital banks: up to two digital full-bank licenses for firms headquartered in Singapore and controlled by Singaporeans which allow licensees to provide a wide range of financial services and take deposits from retail customers, and an additional three licenses for digital wholesale banks which will be open to both local and foreign players. The second category is limited to corporate clients only, and not for the retail market, the MAS said.
To be eligible for full bank licenses, foreign companies must form a joint venture with a Singapore company. Application for digital wholesale bank licenses is open to all companies.
--With assistance from Lilian Karunungan.
To contact the reporters on this story: Chanyaporn Chanjaroen in Singapore at cchanjaroen@bloomberg.net;Yoolim Lee in Singapore at yoolim@bloomberg.net
To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, John McCluskey
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