The Monetary Authority of Singapore (MAS) recently announced that Singapore is open for digital-only banks (MAS spells out criteria for new digital bank licences, Aug 30).
It will issue up to two licences for digital full banks, and three for digital wholesale banks. If all goes well, they will start operations by mid-2021.
Companies that already have some kind of wallet management as part of their online business will likely show interest.
But does the public know what a digital-only bank is, what the differences between a digital full bank and a digital wholesale bank are, and what the benefits of such banks as compared with traditional brick-and-mortar banks are?
Currently, banks have a robust know-your-customer process, where staff meet the customer face to face, get the documents signed, understand their needs and advise them accordingly.
How will a digital bank carry out this know-your-customer process? Uploading photos and documents online and relying on some degree of artificial intelligence to analyse and validate the data may pose a security risk.
Since digital banks do not have branches, how will they meet the needs of a growing ageing population?
One might argue that their services are aimed at tech-savvy people. But even the non-tech-savvy may be attracted to lower service fees that are likely to be charged by the digital banks.
In dispute cases or when help is needed, will there be a physical location for customers to seek clarifications? Full-range customer support on the phone may not be a user-friendly option.
While going digital is an important aspect of a Smart Nation, it is equally important that the monies of customers are secure.
Customers should be made aware if the current deposit protection scheme is applicable to these banks too.
More importantly, we need to clearly spell out the avenues for customers to settle any legal disputes that may arise.
MAS should hold public sessions to seek some feedback that can be incorporated in the regulations.
Do not leave it to the corporates to run the show.
Ramamurthy Mahesh Kumar