The Singapore market might not be ready for fully digital banks despite the city-state’s regulator announcing five digital banking licences this week, according to Doug Gyani, principal consultant at Principia.
“I think the interesting question here is, what is the demographic that responds well to that service level?” asks Gyani. “I don’t know if the Asian markets are necessarily the right place. I feel an Asian consumer from a retail/wholesale banking point of view wants the customer experience more than they want half a point better on a rate because you don’t have to pay for tellers and very big offices.”
“Most of the banks here [Singapore] are more traditional but they have a digital branch, they are not digital wholesale banks. So, I think it is really interesting that they would issue separate licenses and invite that into Singapore,” he says.
On August 29 the Monetary Authority of Singapore (MAS) announced it had opened up applications for two digital full bank (DFB) licenses and three digital wholesale banking (DWB) licenses.
The licences will be extended to non-bank players. The two DFB licences will allow licensees to provide a range of financial services and take deposits from retail customers. While the three DWB licences will allow licensees to serve SMEs and other non-retail segments. The application process closes on December 31.
On June 28 the senior minister and chairman of MAS said in a statement after the announcement of proposals for the five banking licences that “the new digital bank licences mark the next chapter in Singapore’s banking liberlisation journey. They will ensure that Singapore’s banking sector continues to be resilient, competitive, and vibrant.”
The application process for the DFB licences is open to foreign companies who have formed a joint venture with a Singaporean company, and the joint venture meets “headquarter and control requirements,” according to the statement.
Applicants will have to prove they have a “clear value proposition and a sustainable business model” to be considered, but providing a strong plan for success could prove difficult, says Gyani.
“When you think about digital banking from a success point of view, you just don’t come up with a lot of names that are strictly digital banks,” says Gyani. “It is a great concept if it brings certain technologies that are available now that weren’t available then like blockchain, and coin-based banking, then I think there is potentially more viability to it.”
DFB applicants will be required to “include commitment of funds or concrete fundraising plans to meet the minimum paid-up capital of $1.5bn that is required when the DFB becomes a fully functioning DFB.”
For Gyani, fintech activities have been building up to this announcement.
“Singapore has always been at the forefront of this type of promotion of technology and this type of promotion of the use of technology,” he says. “Banking is already starting to make big moves here. I’ve seen a lot of fintech pop-up, and a lot of recruiters looking for fintech guys and looking at banking sector growth in the past month or so.”