Billionaire Jack Ma's Ant Financial Services Group said it may apply for a virtual banking licence in Singapore, a move that would add a heavyweight contender to the race.
"We are actively looking into this opportunity," Ant Financial said in response to Bloomberg queries.
The Monetary Authority of Singapore is offering as many as five digital banking permits to non-banks in a bid to open up the industry to new competitors.
A successful entry by Ant would pit China's largest online financial company against traditional incumbents DBS Bank and OCBC Bank in the growing market for digital banking in South-east Asia.
While Ant did not disclose whether it would seek a retail or wholesale licence, it would be easier for the Chinese firm to meet the conditions for the latter.
Singapore's efforts to open up the banking industry to technology companies come on the heels of a similar move in Hong Kong, where Ant and Chinese competitors, including Tencent Holdings, obtained licences earlier this year.
"The recent licensing of several China 'Big Tech' banks in Hong Kong represents the formal entry of such players into the international financial system," said Mr James Lloyd, Asia-Pacific financial technology lead for consulting firm EY.
"It seems probable that Singapore will follow in this regard," he added, while pointing out that foreign applicants have more room to manoeuvre with a digital wholesale bank rather than a full-service one.
There are up to two licences on offer for full digital banks, which can serve all kinds of customers, and require $1.5 billion in capital as well as local control. Another three licences would be for wholesale banks, which foreign firms can run, and need a capital threshold of $100 million.
$150b Expected value of South-east Asia's digital lending market by 2025, according to a report by Bain & Co, Google and Temasek.
OCBC has agreed to join peer-to-peer lender Validus Capital and Temasek's venture capital arm to seek a wholesale licence before the year-end application deadline. DBS, which operates a digital bank in India and Indonesia, has not expressed any intention to seek a licence.
South-east Asia's digital lending market is expected to more than quadruple to US$110 billion (S$150 billion) by 2025, according to a report by Bain & Co, Google and Temasek.
The Ant SME Services (Hong Kong) unit received a permit from the Hong Kong Monetary Authority in May to operate a virtual bank in the Chinese territory.
Ant's payments app Alipay and its local e-wallet partners had about 900 million annual active users in China, and 1.2 billion globally as of June, according to Bloomberg Intelligence.