On 29 August, the Monetary Authority of Singapore (MAS) began accepting applications for Singapore’s first digital bank initiative. Five licences are up for grabs from non-bank players — two for digital full-fledged banks and three for restricted digital banks. Interested parties have until 31 December 2019 to submit their applications. MAS will announce the successful applicants in mid-2020, and the digital banks are to commence business by mid-2021.
MAS also laid down some ground rules for applicants to prevent frivolous applications. Applicants need to 1) have a track record of at least three years in an existing business within the e-commerce or technology fields; 2) provide a clear value proposition for serving unmet or under-served needs of certain segments of the population; and 3) ensure they have a sustainable path to profitability.
With these in mind, let’s have a look at the contenders who have announced their intention to apply for the licences.
P2P lender, e-Payments and e-Wallet businesses
A number of start-ups in the e-payments and e-wallet scene have expressed an interest in applying for the licences, though it is not known if they have a track record of profitability or the minimum three-year operating period. Validus Capital, backed by Temasek’s Vertex Ventures, has indicated an interest in applying. E-Wallet operators Liquid Group, MatchMove and Xfers have also shown interest in applying, while mobile payments solution provider FOMO Pay and remittance start-up InstaRem have also thrown their hat into the ring.
Telcos, existing banks and fintech firms
Singtel (SGX: Z74) and OCBC Bank (SGX: O39) are in talks to partner for a shot at the digital licence, while recently-privatised M1 is also considering applying. Malayan Banking Berhad (KLSE: 1155) had just recently announced that it would mull an application as well, though nothing has been confirmed.
Established fintech firm iFast Corporation Limited (SGX: AIY) had indicated its interest in applying for the Singapore digital banking licence, while loss-making Razer Inc (SEHK: 1337) is confident of being able to clinch one of the licences as it is already rolling out Razer Pay, an e-payments solution.
A few other contenders that do not fall into the above categories include Grab, the ride-hailing company that has grown by leaps and bounds over the last few years. Sygnum, a cryptocurrency firm that is in the process of applying for a Capital Markets Licence, has also indicated its interest in applying for a licence.
Disrupting the banking industry
With such a wide range of contenders for just five licences, it’s going to be interesting to observe which party is eventually selected by MAS. Other hidden contenders who had not expressed their interest as yet may also step up to the plate, thus competition may become keener as the closing date nears.
Whoever wins the licences, one thing is for sure though – the Singapore banking industry is set to see its most significant disruption in the last 20 years. These will be exciting times for both investors and depositors, and I will be keenly tracking and monitoring the progress of digital banking in Singapore.
The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore has recommended shares of Malayan Banking Berhad, Oversea-Chinese Banking Corporation Ltd and iFast Corporation Limited. Motley Fool Singapore contributor Royston Yang owns shares in iFast Corporation Limited.