After a few months of studying its viability, the Monetary Authority of Singapore (MAS) has finally decided to let non-bank fintech firms set up and operate digital-only banks.
These refer to financial institutions that fulfil all their transactions and banking related services online, without having physical branches.
The MAS will be issuing up to five new digital bank licenses, Senior Minister and MAS Chairman Tharman Shanmugaratnam announced at the 46th annual dinner of The Association of Banks in Singapore.
Out of the five, there will be two digital full bank licenses that allow licensees to serve retail customers through a wide range of financial services.
Firms that are granted this license can also take deposits from customers.
The remaining three are set aside for digital wholesale bank licenses, which enable licensees to serve SMEs and other non-retail segments.
This new type of license will first be introduced as a pilot, while MAS observes if it’s suitable to offer more of them in the future.
MAS believes the entry of new digital players will “add diversity and strengthen Singapore’s banking system in the digital economy future”.
“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,” they said.
Previously, Singapore banks have been allowed to set up digital banking subsidiaries since 2000. But this will be the first time that companies with no banking parentage get to enter the market.
Even before MAS finalised its decision, Grab already stood out as a potential player with interest in this field.
Early this month, unnamed sources told Reuters that Grab was close to hiring a consultancy to advise them on their banking potential in Singapore.
S’pore Firms Can Apply In August
The MAS has stated that only companies headquartered in Singapore, and managed by Singaporeans, can apply for the two digital full bank licenses.
Foreign companies are only allowed to apply if they partner a local firm to set up a joint venture that meets the headquarter requirements.
Tharman cites maintaining “a strong local core in [Singapore’s] banking system” as the reason for this limitation.
However, the three digital wholesale bank licenses will not be bound to these rules.
Firms can begin applying as soon as August 2019, and the MAS will be providing more details on eligibility and admission criteria later.