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Everything About the 4 New Digital Banks in S’pore Which Work Like Normal Banks

2020-12-05 , 10:00 am

Grab isn’t just going to be that food delivery or private-hire service from now on.

In 2022, they’ll also be that online bank together with Singtel.

Recently, the Monetary Authority of Singapore (MAS) announced that they’ll be giving full digital banking licenses to 4 new entities in Singapore.

Here’s everything you need to know about it.

What Is A Digital Bank?

A digital bank, as its name suggests, is a bank that is fully online.

It operates like your friendly neighbourhood POSB, where you can open accounts, issue debit and credit cards and allow deposits, except you won’t find any physical infrastructure like a bank branch.

Customers who have an account with these digital banks can control their finances solely via their smartphone or on the computer.

Think of it as Shopee vs Jurong Point. Both are “shopping malls” which allows you to buy products from many different sellers but only one has a physical location.

Differences Between Traditional & Digital Banks

Other than the lack of physical infrastructure, there isn’t much difference between traditional banks like DBS and a digital bank, at least in terms of services provided.

According to a previous report, MAS wants to allow digital banks in Singapore to offer the full range of services like its traditional counterparts but will be starting them off a “restricted” stage first.

In the restricted stage, they can only get a limited amount of deposits (about S$50 million or S$75,000 per person) until they meet the minimum start-up capital of $1.5 billion “within 3 to 5 years”.

The Four New Digital Banks

On 4 Dec 2020, MAS announced that they’ll be granting digital full bank license to two groups who’ve made successful bids.

They are:

The Grab-Singtel Consortium
Tech Giant SEA (parent company of Shopee)

In addition, they will also be awarding digital wholesale bank licenses to two other groups:

They are:

Ant Group (an affiliate company of Alibaba and the world’s highest-valued fintech company)
A consortium consisting of Greenland Financial Holdings, Linklogis Hong Kong and Beijing Co-operative Equity Investment Fund Management

A full digital bank license allows the digital bank to serve retail customers (people like you and me) while a wholesale digital bank license allows it to serve corporates and small-to-medium enterprises (SMEs).

Not A Done Deal Yet

However, while MAS has revealed that it plans to give licenses to these four entities, it’s not set in stone yet.

In a statement, MAS said that the successful applicants must fulfil all “relevant prudential requirements and licensing preconditions” before they are granted the banking licenses.

All four digital banks are expected to start operating from early 2022.

It was added that the successful candidates were selected through a “rigorous, merit-based process” with the intention of creating a slew of strong digital banks.

The digital banks are expected to thrive together with the major banks in Singapore and help bring the financial services here to the next level.

Responses 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.”.

Meanwhile, 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.

Chairman and Group CEO of SEA, Forrest Li, says that “as a home-grown company”, they’re proud to be able to contribute to Singapore’s digital economy.

Turns out, it’s not just the new players that are happy.

DBS Singapore country head Shee Tse Koon congratulated the successful applicants and believe that with more competition, the bank will be “spurred on” to be better and provide more “intuitive and invisible” banking services.

It should be noted that as far as digital banking goes, DBS was voted the best bank in the world for many years and is well-known for their digital transformation.

UOB chief executive Wee Ee Cheong is of the same opinion, believing that the additional competition will bring progress “especially in the area of digital innovation” to Singapore.

Meanwhile, OCBC Sunny Quek says these four new entrants will be entering a “hypercompetitive” environment where traditional banks have already embraced digitalisation.

As for the rest of us mortals, we’re just hoping that, just like digital telcos and their exceptionally low prices, digital banks will be able to bring about ways (with lower costs) for normal people to make more money. Agree?

Featured Image: Kenishirotie / Shutterstock.com