Monetary Authority of Singapore (MAS) has resumed the assessment process to award its five coveted digital banking licenses and stated that the winners will be announced in H2 2020. In April 2020, amid the pandemic concerns, the assessment process was put on hold and the 21 applicants were asked to review their business proposals, assumptions, valuations underpinning their financial projections keeping in mind the immediate and post pandemic impact on its business.
With the resumption of the assessment process, MAS announced in June 2020 that it will go ahead with reviewing 14 of the 21 applications stating that “eligible applicants, comprising five digital full bank (DFB) applicants and nine digital wholesale bank (DWB) applicants, will progress to the next stage of assessment”, doing so without revealing any names or bid details. This being said, certain applicants – SEA Ltd and Ant Financial and consortiums such as Grab and Singtel, Razer and Sheng Siong Holdings, FWD, LinkSure Global, Insignia Ventures Partners, Carro and iFast Corporation partnering with Hande Group & Yillion Group – have made their bids public.
While acquiring a digital banking license seems pivotal for all these players, most of them come with bare minimum experience of operating a bank. While having relevant experience when venturing into a new business is a stereotypical question, a relevant one is who are these applicants going to service? Singapore with a population of about 5.9 million has an internet penetration of about 88% according to a survey. Also mobile app banking in Singapore stand at about 65%. Considering this, it’s hard to think of what value proposition could the 14 applicants bring which differentiates them from other banks? The simple answer to this is to serve the underserved SME sector and workers from unorganized sectors. This digital banking license could foster healthy competition, liberalise banking while being resilient. Companies which want to include financial services as a part of their company portfolio have the chance to use this offering to their advantage.
Another good news for StanChart is that it was recently qualified as a Significantly Rooted Foreign Bank (SRFB) in Singapore. According to the SRFB Framework, the bank can now “establish up to 50 POBs, of which up to 35 may be branches.”
While this is true for the known contenders, an unannounced applicant named Phoenix – a consortium of NTUC and Standard Chartered is also in the race for the digital banking license. While contemplating who could head the digital banking initiative in Singapore, TDB perceives co-founders of neobanks such as Judo Bank, Xinja or 86 400 could be credible candidates for this role. For those unaware, Standard Chartered forayed into Africa in 2018 with a digital-only bank in Côte d’Ivoire (CDI) following it up with Uganda, Tanzania, Ghana and Kenya in 2019. Armed with this information, it is obvious why Standard Chartered is entering the race for the digital banking license in Singapore. The bank is well positioned to take advantage of this offering and with success projects in Africa, StanChart is uniquely qualified to come out a winner. Also, one of the key items in the business proposal for the digital banking license application must include regional expansion plans. This would provide the much needed entry point into Southeast Asian markets which hold similar value propositions as Africa.
Another good news for StanChart is that it was recently qualified as a Significantly Rooted Foreign Bank (SRFB) in Singapore. According to the SRFB Framework, the bank can now “establish up to 50 POBs, of which up to 35 may be branches.” Not only this MAS is considering enhancements to the framework which will grant “additional full bank licence to an SRFB that substantially exceeds the SRFB baseline criteria. This will enable them (SRFB) to have the same flexibility as Singapore-incorporated banking groups to establish subsidiaries, including with joint-venture partners, to operate new or alternative business models such as a digital-only bank.” With all this being said, StanChart seems to be in the right place to use’s MAS’s proposition.
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