The Monetary Authority of Singapore (MAS) has announced it will begin accepting applications for new digital bank licences from non-bank entities.

The central bank will issue up to five digital bank licences, as announced by Senior Minister Tharman Shanmugaratnam, who is also chairman of MAS.

Two of the five licence holders 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.

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.

Digital banks are not new in Singapore – established local banks like DBS, OCBC, UOB have been operating this business model for years.

However, what is different this time is that non-bank entities are also allowed to apply for the licence.

Singtel, Grab, and Razer have already expressed preliminary interest in applying for those licenses.

With Singapore being a small market, analysts said the prize is in tapping the larger Asean market.

Sam Kok Weng, Financial Services Leader, PwC Singapore, said Singapore can serve as a test bed for the new digital banks to pilot their operations before expanding into other markets in Asean, contributing to financial integration within the region. “With these Singapore pilots, the digital banks can demonstrate to regional regulators the viability of their business models as well as their risk management and compliance capabilities,” he added.

WHY DOES IT MATTER?

MAS said these new digital bank licences mark the new chapter in Singapore’s banking liberalisation journey, and ensure that Singapore’s banking sector continues to be resilient, competitive and vibrant.

Competition would will give local banks more reasons to innovate with technology. This would likely result in better digital banking services for businesses and consumers in the long run.

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