Traditional banks are set to face new competition from a new wave of digital banks who can offer better savings and borrowing rates, as they don’t need to spend money on overheads such as physical branches.
With most adults in the city already having access to financial services, the introduction of digital lenders into the Singaporean market acts as a gateway to the region, where many consumers still lack bank accounts.
Grabbing Singapore’s digital banking license
According to Singapore’s central bank, a group of 21 applicants are competing for five digital banking licences. This includes Alibaba founder Jack Ma’s online platform Ant Financial, and a joint bid between Southeast Asian ‘super app’ giants Grab and the region’s biggest telecom player, Singtel.
Other bidders are Asia’s biggest massage chair maker, V3 Group, and computer gaming firm Razer. The latest consortium to enter the race is led by Hong Kong financial services provider AMTD Group. It includes Singapore’s power grid operator SP Group, tech company Xiaomi’s finance arm and crowdfunding platform Funding Societies.
Room for growth
Two of the digital banking licences will be for full banking operations, allowing holders to take deposits from consumers, while the remaining three will be for ‘wholesale’ banking, limiting a lender to mostly dealing with small and medium-sized enterprises.
Experts say the move is unlikely to cause massive changes, as traditional banks have begun to introduce digital services. However, the future impact could be massive if the new online lenders expand across a region of more than 600 million people.
The opportunities are certainly there, as nearly a third of people in Southeast Asia still do not have bank accounts, according to a report by Google, Singapore investment firm Temasek and business consultancy Bain & Company.
Winners of Singapore’s online-only banking license will be announced in June 2020, with operations starting in 2021.
Source: AFP Relaxnews