Compliance Corner: Monetary Authority Of Singapore, Digital Licences

Editorial Staff

9 January 2020

The said yesterday that it has received 21 applications for digital bank licences, highlighting how the Asian city-state is pitching to get an edge in the fintech space.

The applications comprise seven bids for full bank licences and 14 for requests for the digital wholesale bank certifications, MAS said in a statement earlier this week.

“The new digital bank licences have attracted strong interest from a diverse group of applicants. These include e-commerce firms, technology and telecommunications companies, fintechs (such as crowdfunding platforms and payment services providers) and financial institutions. The majority of applicants are consortiums, with entities seeking to combine their individual strengths to enhance the digital bank’s value proposition,” it said.

The regulator said it will say which applications are successful in June this year; the winners are due to start business in the middle of 2021.

Singapore’s regulator is offering as many as five digital banking permits to non-banks in a bid to open up the financial industry to new competitors.

Ant Financial, the affiliate business to e-commerce giant Alibaba, has applied for a digital banking licence in Singapore, according to media reports. The Straits Times of Singapore has (2 January) noted that Southeast Asia's digital lending market is expected to more than quadruple to $110 billion by 2025, citing a report by Bain & Co, Google and Temasek Holdings.

Such developments show how technology-driven firms are to some extent crashing a party for years dominated by incumbent banks. Amazon has been reportedly talking to JP Morgan about opening a cheque account. Apple launched a credit card for iPhone users earlier in 2019 with Goldman Sachs. Facebook has unveiled a new system to enable payments across its systems. More controversial still is Facebook's Libra digital currency programme, which has generated pushback from regulators. As part of a project code-named Cache, Google is also reportedly pushing into the space.

One concern will be how these Big Techs have used client data in the past. In the case of Facebook, for example, controversy over the use or misuse of customer data might mean that regulators impose tough rules on how they operate as financial institutions. Banks in most developed countries also come under significant regulatory control, and are required to provide depositor protection, maintain capital buffers against adverse market events such as a share price plunge, and police questionable financial transactions.