2020: the year of customer-centric banking
The Monetary Authority of Singapore (MAS) has received 21 applications for digital bank licenses.
Tarini Ponniah, Chief Compliance Officer for Bruc Bond Singapore, says that she’s glad to see the city-state join the likes of the United Kingdom in embracing customer-centric digital banking. Coordination and cooperation between the MAS and regulators in other fintech- and digital banking-focused jurisdictions, like Poland, Lithuania, Japan and Australia, would hasten the widespread adoption of digital banking worldwide, she adds.
"With these digital bank licenses customer-centric banking is finally going to be a reality,” says Tarini Ponniah. “Singapore is yet again proving to be a front-runner in powering growth in the region by focusing on the demands of the un- and under-banked segments.”
Digital Banking in Singapore
The MAS is widely regarded as a nimble and forward-thinking regulator. This is why it came as no surprise that the MAS was quickly moving ahead with plans to issue licenses to digital banks. The applications quickly came pouring in, with the MAS announcing that it has received 21 applications for digital bank licenses at the close of the application period on 31 December 2019. Of these, seven applications were submitted for the digital full bank (DFB) licenses and 14 applications for the digital wholesale bank (DWB) licenses.
Submissions came from a diverse group of applications, including technology and telecommunications companies, e-commerce purveyors, a host of fintechs and from traditional financial institutions. A majority of the applications came from ad hoc consortiums created to leverage the respective strengths of individual players.
Some of the more interesting and well-known applications include a joint venture by Grab, a ride-sharing company in Singapore, and Singtel, one of the country’s foremost telecommunications giants; China’s Ant Financial; Singapore’s power grid operator SP Group; crowdfunding platform Funding Societies; Chinese electronic giant Xiaomi’s financial arm; and gaming company Razer.
The MAS intends to announce the successful applications in June 2020, who are slated to commence operations by mid-2021.
The MAS is intending to issue two types of licenses, one for digital full banks (DFB) and the other for digital wholesale banks (DWB). DFB’s are intended to serve retail customers, and to protect consumer interests the MAS is requiring licensees to meet stringent regulatory requirements, including meeting minimum paid-up capital of S$1.5bn. DFB’s must be based in Singapore and be controlled by Singaporeans.
Digital wholesale banks, by contrast, are intended to serve the B2B market. Their customers will be limited to small and medium-sized enterprises (SMEs) and other non-retail customers. Hence, their requirements for licensees are somewhat less exacting, with licensees needing only S$100m in capital. DWB’s can be majority-owned by non-Singaporeans.
One of the central requirements by the MAS is that applicants must “show a "clear value proposition" to meet under-served needs using technology,” the Straits Times reports.
The European Example: Britain, Poland and Lithuania
Like the MAS, European regulators are keen on adoption of innovative, customer-centric solutions. In recent years, Lithuania has become a key locale for Europe’s expanding network of non-bank financial institutions (NBFI), which has significantly raised the country’s standing in global financial markets. Neighbouring Poland has taken a different route, encouraging its highly-developed banking sector to adopt digital solutions to consumer needs. It is for this reason that a recent Deloitte study found Poland to be a leader in digital banking. “We can say that Poland is a digital leader, but Polish banks are varied in this regard,” commented Deloitte’s Daniel Majewski.
Leading the digital banking pack in Europe is the United Kingdom. The UK has now become a competitive hotbed for digital banks, with several eyeing penetrating markets very far from home. As a matter of fact, Britain’s Revolut was at one point an applicant for the MAS DFB license, before withdrawing its application. Their success has been nothing if not extraordinary, with so-called challenger banks now amassing millions of customers in Europe and worldwide, and expecting to treble their customer bases in 2020.
Tarini Ponniah says she hopes to see that kind of success replicated in Singapore, at least to begin with. Long term she would like to see much more cooperation between regulators to accelerate digital banking adoption in their respective jurisdictions. She hopes British and Singaporean regulators will be able to share from their experience to the benefit of customers worldwide.
For more information about Bruc Bond please visit www.brucbond.com
By Tarini Pooniah, COO, Bruc Bond Singapore