Virtual banks a possibility in S'pore, says DBS chief exec

Singapore could follow Hong Kong in handing out virtual banking licences, according to the head of DBS Group Holdings, which would create more competition for established banks in the Republic.

"I see no reason why it would not," DBS chief executive Piyush Gupta said in an interview with Bloomberg Television, when asked if the authorities here might issue such licences.

But he downplayed the likely impact on Singapore's banks, which are competing with both international giants like Citigroup and financial technology (fintech) start-ups.

Provided incumbent lenders have been upgrading their digital capabilities, he said, virtual banking newcomers should not be seen as a threat. "To my mind, that's just basically giving a few more banking licences."

Of the firms to have received virtual banking licences in Hong Kong, three have partnered with financial institutions such as Standard Chartered, BOC Hong Kong Holdings and ZhongAn Online P&C Insurance. Fintech firm WeLab Holdings has also received a licence.

The new entrants are targeting a market dominated by HSBC Holdings, which has a leading share of retail and corporate lending, mortgages and credit cards.

Virtual banks typically have lower operational costs than traditional lenders, which rely on brick-and-mortar branch networks.

Last month, Mr Gupta told DBS' annual shareholder meeting that a new digital bank could generate US$100 (S$136) of income from a cost base of a little more than US$30.

DBS' own cost-to-income ratio was 44 per cent last year.

Mr Gupta said he would see a problem only if virtual banks are allowed to operate on more lenient terms than the incumbents, such as in terms of the capital they must hold.

"The real challenge is if the regulators create an unlevel playing field, and let the new bank licensees... do banking on different terms," he said, but added that most regulators did not seem inclined to do so.

Singapore's banking landscape is dominated by DBS, OCBC Bank and United Overseas Bank, though foreign firms such as HSBC and Citigroup have branch networks.


A version of this article appeared in the print edition of The Straits Times on May 07, 2019, with the headline 'Virtual banks a possibility in S'pore, says DBS chief exec'. Print Edition | Subscribe