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Everything You Need To Know About Singapore Digital Banking License And How Singaporeans Can Benefit
Digital Banking Singapore: Who are the Winners?
On 4th December 2020, the Monetary Authority of Singapore (MAS) announced four successful digital bank applicants.
The four successful applicants beat 10 other contenders, such as Razer Youth Bank, a consortium which includes Temasek unit Heliconia Capital Management, property developer Far East Organization, Singapura Finance, and a consortium by Ron Sim's V3 group, Singapore Business Federation, and stored-card operator EZ Link.
Digital Full Bank Winners
Tech giant Grab will hold a 60 percent stake in the consortium, while Singtel will hold the remaining 40 percent. This issuing of the license to the Grab & Singtel consortium comes as no surprise at all. Grab is already a leading player in the financial services industry in Singapore, offering not just digital wallets but they provide lending and insurance as well. With the expected mergers between Grab and Go-Jek on-going, they will capture more customer data while Singtel's telco customer base is currently unrivaled.
Response to the announcement:
Grab CEO and founder, Anthony Tan, said that they are honoured and excited to help build Singapore’s “next-generation digital bank” and open up “open up access to easy-to-understand and relevant financial services.”.
Singtel Group CEO Yuen Kuan Moon is confident that, with the digital expertise of both Singtel and Grab, they will be able to improve banking services for both consumers and businesses here
SEA LIMITED is an internet platform provider and operates Garena, Shopee, and Sea Money
Response to the announcement:
Chairman and Group CEO of SEA, Forrest Li, said that “as a home-grown company”, they are proud to be able to contribute to the long-term development of Singapore’s digital economy, while creating more employment opportunities in Singapore.
Digital Wholesale Bank Winners
MAS also awarded China’s Ant Group, and a consortium comprising Greenland Financial Holdings, Linklogis Hong Kong, and Beijing Co-operative Equity Investment Fund Management with the digital wholesale bank license.
ANT GROUP (previously ANT FINANCIAL)
As Alibaba Group's fintech giant arm, much has been discussed about the failed ANT's IPO in Shanghai and Hong Kong at the eleventh hour for a record-breaking initial public offering.
The award of the Digital Wholesale Bank license is great news for Jack Ma's ANT Group as their dominant market, China, was about to unleash a slew of new rules that would reset the fintech landscape in China which financial inclusion driven by internet platforms would take a back seat to financial stability and protecting traditional lenders.
A consortium comprising Greenland Financial Holdings, Linklogis Hong Kong, and Beijing Co-operative Equity Investment Fund Management
The group business model is to build a digital banking business that taps on China's financial technology to serve small and medium-sized enterprises (SMEs) in Singapore, by leveraging partners’ capabilities.
Greenland Financial Holdings - They belong to Chinese real estate developer and state-owned enterprise, Greenland Group.
Linklogis Hong Kong - Licensed money lender and money service operator under Hong Kong Laws and part's of its shareholders are Standard Chartered's bank in its supply chain financing platform.
Beijing Co-operative Equity Investment Fund Management - They are a private equity company based in Beijing, China.
What Is the Difference Between Digital Wholesale Bank (DWB) and Digital Full Bank (DFB)?
Digital Bank operates just like your normal DBS, UOB, etc offer traditional banking services except it operates entirely online without any single physical infrastructure such as a bank branch or ATM services. Consumers can control their finances entirely from their computers and smartphones.
The Digital Full Bank (DFB) will allow the consortiums to lend money to other companies and individuals, as well as serve retail customers. They can take deposits and perform banking services to retail and SMEs segments. Only local companies and foreign companies with a joint venture with a Singapore company can apply for this.
The Digital Wholesale Bank (DWB) is only allowed to serve SMEs and other non-retail segments. They are allowed to take deposits and provide banking services to SMEs and other non-retail segments. Foreign companies are allowed to apply for this. Both licenses will be eligible for MAS' liquidity facilities and be direct participants of FAST and MEPS+.
Both can also conduct Insurance Business in Singapore but they are required to obtain a license from MAS pursuant to the Insurance Act before they are allowed to distribute Insurance products underwritten by licensed insurers.
Not A Done Deal Yet. When Will They Start Operating?
Eligible applicants must fulfill all “relevant” prudential requirements and licensing preconditions' before they are granted the banking license. All four digital banks are expected to start operating from early 2022.
How Can Singaporeans Benefit From Digital Banks?
Digital banking offers convenience for consumers. While consumers can save time and hassle through digital banking services, this helps to reduce overheads for the digital banks, which in turn translates to having better personalization and banking benefits such as providing higher interests to customers.
For example, when Hong Kong launched its first digital bank, it announced its arrival with a 6% introductory rate for deposits. This offer is about 4 percentage points more than its traditional banking competitors such as Standard Chartered, HSBC, and Bank Of China Hong Kong who are paying between 1.9%-2.3%.
As competition heats up in order to compete for retail and SMEs customer deposits and businesses, expect favourable rates and unique product offerings from Digital banks as they compete with traditional banks. Not to mention for Financial Institutions that see the competition will not rest on their laurels and will find ways to retain and provide more value-added services to consumers and SMEs, which only means more good news for us.
Singapore's banking system is dominated by the three major local financial institutions, namely DBS Group Holdings, Oversea-Chinese Banking Corporation, and United Overseas Banks. These new entrants will expect to target underserved customers such as small merchants and young people. As central banks like Malaysia and the Philippines also plan to issue digital banking licenses in the near future, Singapore's Digital Banking climate will definitely be closely watched in Southeast Asia.
Will you ditch your traditional bank's services with the digital banks?
Read also: Digitisation and Digitalisation, What’s the Difference?
Read also: Corporate Income Tax Filing Season 2020: 6 Things SMEs Need To Know -------------------------------------------------------------------------------------------------------
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