The central bank in Singapore has announced that it will issue five digital bank licenses to eligible applicants, according to a report by Reuters.
The move could significantly alter the financial landscape for the first time in 20 years, as the space is currently controlled by traditional banks.
“The new digital bank licenses mark the next chapter in Singapore’s banking liberalization journey,” said Tharman Shanmugaratnam, senior minister and chairman of the Monetary Authority of Singapore (MAS). “We welcome firms with innovative value propositions to apply for the digital bank licenses, even if they have not yet established a track record in banking,”
The top banks in Singapore are DBS Group Holdings Ltd, Oversea-Chinese Banking Corp and United Overseas Bank Ltd.
Ride-hailing company Grab, which also does food delivery and payments, is rumored to be one of the firms being looked at for a license. Others in consideration are global FinTech companies, some of which may form ventures together.
The invite applications are expected to go out in August.
“The far-reaching effects of digitalization are stimulating a fundamental re-think of the role of banks, in most advanced financial centers,” Shanmugaratnam said. “We are starting with two digital full bank licenses, so as not to fragment Singapore’s small domestic retail banking market.”
The first digital banks will be restricted in what they can do, so they have time to build up and grow both in terms of business practices and standards of operations. Eventually, they will act as fully formed banking institutions.
In Hong Kong, digital banking licenses were issued earlier this year, and the two markets are strong competitors. Alibaba and Xiaomi related companies were given licenses, as well as a group venture led by Standard Chartered PLC and BOC Hong Kong Holdings Ltd.
In a statement, the MAS said that it was going to issue up to two licenses for digital banks that are headquartered in Singapore and that are also controlled by citizens of the country.