MAS accepting applications for Singapore's first digital bank licences till year end

The Monetary Authority of Singapore is accepting applications for the new digital bank licences until Dec 31, 2019.
The Monetary Authority of Singapore is accepting applications for the new digital bank licences until Dec 31, 2019.PHOTO: REUTERS

SINGAPORE - At least one of the parties in a group applying for one of the new digital banking licences must have a track record of three or more years operating a business in the technology or e-commerce field.

That was one of several criteria laid down on Thursday (Aug 29) by the Monetary Authority of Singapore (MAS).

It noted that such a party must hold at least 20 per cent of the total issued shares in the proposed digital bank, or control at least 20 per cent of its voting power.

The MAS is accepting applications for the new digital bank licences until Dec 31.

There will be no more than two licences for a digital full bank and up to three for a wholesale digital bank. Digital full banks are subject to the same regulatory requirements as existing banks, including rules relating to technology risks, money laundering and terrorism financing.

Successful applicants will be announced in mid-2020 with parties expected to start business by mid-2021.

Among the key assessment criteria are the value proposition of the applicant's business model, its ability to manage a "prudent and sustainable" digital banking business, as well as its growth prospects, said the MAS.

The move to offer digital banking licences has sparked talk of collaboration among new entrants to the sector, non-banking players and traditional lenders.

Several companies have already signalled their interest, including listed firms Razer and Singtel, ride-hailing firm Grab and peer-to-peer lender Validus Capital.

 
 
 
 

At least five e-wallet operators, including start-ups Liquid Group and MatchMove Pay, are considering applying as well, while local lender OCBC has reportedly been in talks with companies including telco Singtel over taking a minority stake in any virtual banking joint venture.

Applicants have a number of hurdles to clear before snaring one of the coveted licences and tight curbs once they do get the green light.

They must incorporate the "innovative use of technology to serve customer needs and reach under-served segments of the Singapore market", the MAS said on Thursday.

Applications for full-bank licences are open to companies headquartered in and controlled by Singaporeans, while foreign firms can apply if they form a joint venture with a Singapore firm.

A digital wholesale bank applicant can be controlled by Singaporeans or foreign entities.

The MAS said applicants for a full-bank licence must show clearly how they can tackle unmet needs - some analysts said this could mean serving market segments such as young millennials, SMEs and start-ups - and that they have a sustainable business model.

A digital full bank will operate under tight restrictions for one to two years. It can start operations with a minimum paid-up capital of $15 million and total deposits will be capped at $50 million. Deposits by an individual will be limited to $75,000.

A bank in this initial phase can only operate overseas bank branches or subsidiaries in no more than two other markets.

Within three to five years of starting up, it will be expected to be fully functioning and have the minimum paid-up capital of $1.5 billion.

Digital full banks will not be allowed to access ATM networks but may offer cashback services at retailers.

"Digital full-banks will be allowed to take deposits from and provide a wide range of financial services to retail and non-retail customer segments, while digital wholesale banks will be permitted to serve small- and medium-sized enterprises and other non-retail segments," said the MAS on Thursday.

Maybank Kim Eng analyst Thilan Wickramasinghe noted last month that digital banking developed and tested here will have a competitive advantage in regional economies given Singapore's robust regulatory regime and advanced technology.