Everything you need to know: Digital bank licence, digital full bank and digital wholesale bank

By January 7, 2020Current, Tech

TL;DR – Five digital bank licences, 21 applications.

The story

The Monetary Authority of Singapore (MAS) began accepting applications for up to five new digital bank licences from non-bank players from late August 2019, and the deadline for application has closed on 31 December 2019.

The five licences on offer include two digital full bank licences and three digital wholesale bank licences.

MAS has received a total of 21 applications at the close of application. Out of these, seven were for the digital full bank licences and 14 for the digital wholesale bank licences.

MAS is expected to announce the successful applicants in mid-2020, and we can probably see these digital banks in operation by mid-2021.

So what are digital banks?

It is exactly what its name says. A digital bank offers the same type of banking services such as a traditional bank except it operates entirely online on a digital platform without physical infrastructure, such as a bank branch.

Yeps, this means that customers of a digital bank manage and control their finances online, from computers, tablets and phones.

What is the difference between a digital full bank and a digital wholesale bank?

Digital full banks will be allowed to take retail deposits. This means the two digital bank licence holders will be able to become digital full-fledged banks that can provide a wide range of financial services and take deposits from retail and non-retail customers.

Digital wholesale banks will focus on serving small and medium enterprises (SMEs) and other non-retail segments.

Who can apply for these digital bank licences?

Applicants must have a track record of at least three years in an existing business within the technology or e-commerce fields.

Applicants must be able to provide clear value propositions on how it can serve existing unmet or under-served needs in the Singapore market. This means that their business models must be different from what existing banks already have.

Must have a sustainable business model that shows a path towards profitability, as well as a feasible exit plan.

There must be at least one individual in the applicant groups to hold a minimum 20 per cent stake in the proposed digital bank or who is in a position to control voting power of at least 20 per cent. 

The full-fledged banks must be based in Singapore and controlled by Singaporeans. Foreign companies are eligible only if they form a joint venture with a local company and a Singaporean must have management control over the venture.

The digital wholesale banks, serving small and medium enterprises and other non-retail segments, are not allowed to take deposits from retail customers except for fixed deposits of at least S$250,000.

(Source: MAS)

Who were the 21 that applied?

Applicants include e-commerce firms, technology and telecommunications companies, fintechs and financial institutions.  MAS said, that  “the majority of applicants are consortiums, with entities seeking to combine their individual strengths to enhance the digital bank’s value proposition.”

Some known applicants include Singtel x Grab, gaming company Razer, NTUC Enterprises, and even Ant Financial. You can check out more applicants here and here.

So, what’s next?

Digital banks are expected to be operational by mid 2021.

For the two digital full-fledged banks that can provide a wide range of financial services and take deposits from retail and non-retail customers, they will commence in a restricted form with a minimum paid-up capital of S$15 million and will be subject to an aggregate deposit cap of S$50 million, with deposits per individual capped at S$75,000.

The restricted digital full bank will be in this phase for one to two years, with the deposit cap and minimum paid-up capital increased progressively.

It will become fully functioning in about three to five years from commencement – once it meets the minimum paid-up capital of S$1.5 billion. At that stage, all deposit caps will be removed.

MAS said this pace of progress is not pre-determined and depends on the applicants and their ability to meet MAS’ criteria.

Will digital banks have physical presence?

MAS has said that digital full banks will only be allowed to operate one physical place of business and are not allowed to access the network of ATMs or cash deposit machines, but will be able to offer cashback services through electronic funds transfer at point of sale (EFTPOS) terminals at retail merchants.

What does this mean for us, the consumers?

Previously, Singapore banking groups could set up digital banks under the existing Internet banking framework that was introduced in 2000. Experts have said that MAS’ move to issue digital bank licences will liberalise the banking industry in Singapore, paving the way for fin-tech companies to become fully fledged banks.

I guess this means we will have more banking choices and competition is likely to drive quality of service delivery up. I think we can also expect more innovation, which may come in the form of more service offerings, especially digitally.

Good news, methinks!


(Featured image via)


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Gabrielle Teo

Author Gabrielle Teo

I read lots, and I also spend an indecent amount of time trying to get my mostly unpopular opinions published. Oh, I argue a lot with fellow Singaporeans who complain incessantly about Singapore too.

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