SINGAPORE: The Monetary Authority of Singapore (MAS) on Thursday (Aug 29) began accepting applications for up to five new digital bank licences from non-bank players.
Interested parties have until Dec 31 to submit their applications, with MAS expected to announce the successful applicants in mid-2020.
These applicants will then be expected to commence business by mid-2021.
MAS said that applicants must have a track record of at least three years in an existing business within the technology or e-commerce fields.
Applicants must also 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.
Other requirements include 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.
Previously, Singapore banking groups could set up digital banks under the existing Internet banking framework that was introduced in 2000.
Experts have said that the move will liberalise the banking industry in Singapore, paving the way for fintech companies to become fully fledged banks.
DIGITAL FULL BANKS ALLOWED ONE PHYSICAL PLACE
The central bank will issue up to five digital bank licences, as announced by Senior Minister Tharman Shanmugaratnam, who is also chairman of MAS.
Out of the five licence holders, up to two 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.
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.
Additionally, digital full banks - regardless of which phase they are in - 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.
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 remaining three can become digital wholesale banks, serving small and medium enterprises and other non-retail segments. They are not allowed to take deposits from retail customers except for fixed deposits of at least S$250,000.
These wholesale banks must have a minimum paid-up capital of S$100 million and can be owned by foreign companies as long as they are locally incorporated.
They will only be able to conduct businesses as outlined in their application in the initial two to three years, but can seek subsequent approval from MAS to expand their business scope.
The entry of new players could lead to the biggest shake-up in two decades in a market dominated by local banks DBS Group, Oversea-Chinese Banking Corp and United Overseas Bank.
"I expect many bidders to come together in consortiums because the slots are limited. There's a strong emphasis on tech companies and Singapore-based firms," said Varun Mittal, who heads the emerging markets fintech business at EY.
Grab, which counts SoftBank Group Corp and Uber among its investors, and Singtel have expressed interest for the licences. Reuters reported sources as saying that global and local fintech firms and overseas banks are also expected to bid for the licences, mainly through joint ventures.
Gaming company Razer said in June that it will "definitely consider" applying for the digital bank licence.
FOMO Pay, a Singapore-based digital payment processing platform that enables enterprises and merchants to accept digital payments across several regions including Southeast Asia and Africa, said on Thursday that it is evaluating the criteria to qualify as an applicant.
FOMO Pay is also a founding member of the Singapore Quick Response (SGQR) taskforce by the MAS.
"Since our inception, we have built a strong network of partners and merchants in Singapore across different sectors spanning education, F&B, telecom, retail and more," said Mr Zack Yang, co-founder and chief operating officer of FOMO Pay.
"The emergence of digital banks coupled with our unique position within the digital payments industry, will enable us to build and distribute more value-added financial service in a more cost-effective way to service the underbanked merchants," he added.