14 digital bank hopefuls move to next stage of assessment

The Monetary Authority of Singapore said it reviewed all the applications received against the eligibility criteria that were announced in August 2019.
The Monetary Authority of Singapore said it reviewed all the applications received against the eligibility criteria that were announced in August 2019.ST PHOTO: KUA CHEE SIONG

The process to establish digital banks here has moved forward, with 14 of the 21 initial applications having met the eligibility criteria, it was announced yesterday.

The 14 successful applicants - five for digital full bank licences and nine for digital wholesale bank licences - will go on to the next stage of assessment.

The Monetary Authority of Singapore (MAS) said in June last year that it would issue up to two digital full bank licences and three for digital wholesale banks.

The 21 applications - seven for digital full banks and 14 for wholesale banks - were received in January and reviewed against the eligibility criteria announced last August.

The final 14 applicants will have to present their proposals to MAS via virtual meetings.

They include the Beyond consortium, led by Osim founder Ron Sim's V3 Group and payments company EZ-Link. The consortium, which is aiming for one of the two digital full bank licences, includes Temasek unit Heliconia, property developer Far East Organization and the Singapore Business Federation.

Some of the other applicants, including gaming firm Razer, New York-listed consumer Internet company Sea, telco Singtel and ride-hailing firm Grab, declined to comment, citing commercial sensitivity.

MAS said applicants will be shortlisted based on their value proposition and business model, incorporating the use of technology, the ability to manage a banking business, as well as growth prospects and other contributions to Singapore's financial centre.

It has asked the 14 applicants to review their business plans and assumptions underpinning their financial projections, including sources of funding, in the light of the pandemic. MAS added that it did not expect this request for updated business plans and financial projections to affect the timeline for awarding the licences by the end of this year.

The five digital bank licences, which are aimed at opening up the banking industry to new competition, has drawn strong interest from diverse applicants, including e-commerce firms, tech and telecom firms, fintechs such as crowd-funding platforms and payment service providers, and financial institutions.

While no names were released, several consortiums went public with their bids, including the Grab-Singtel tie-up, the ones led by Razer and the Beyond consortium and another by Chinese billionaire Jack Ma's Ant Financial.

 
 

Another consortium is led by Hong Kong financial services provider AMTD Group. It includes Singapore power grid operator SP Group, Chinese tech firm Xiaomi's finance arm and crowdfunding platform Funding Societies. The consortium, which made the cut for the next round, said it was targeting small and medium-sized enterprises (SMEs) and entrepreneurs in South-east Asia and Greater China.

Digital-only banks that can operate at lower cost and offer services that differ from traditional lenders are not new. They offer services such as deposits, loans and debit and credit cards like a traditional bank, but transactions are done online and they do not have a physical branch.

They also differ from online banking services that traditional banks provide to customers via the Internet or mobile devices.

Japan, South Korea and China already have such banks. Hong Kong and Taiwan issued licences last year and Malaysia is expected to open applications this year.

 
 

The licence requirements for digital full banks, which can serve retail customers, are more onerous than for digital wholesale banks. They must meet a minimum paid-up capital requirement of $1.5 billion, be based in Singapore and be controlled by Singaporeans.

Digital wholesale banks, whose customers are limited to SMEs and other non-retail segments, need $100 million in capital and can be majority-owned by foreign entities.

Additional reporting by Choo Yun Ting

A version of this article appeared in the print edition of The Straits Times on June 19, 2020, with the headline '14 digital bank hopefuls move to next stage of assessment'. Subscribe