On June 28th the Senior Minister of Singapore Tharman Shanmugaratnam announced that the MAS will issue up to five virtual banking licenses in order to kickstart Singapore’s initiative to liberalise banks. There will be two types of licenses: one suited for B2C transactions and another suited for B2B transactions meaning the issuance of corporate cards and SME loans. Applications will open up in August.
The minimum fundraising capital required for initial application of digital full bank is $15 million. If approved for license the firm must operate as a “digital non-wholesale bank” or a restricted bank. Only after a performance evaluation by MAS may firms move onto the second phase as a graduated bank. Their minimum paid up capital must reach $1.5 billion at this point. Applicants of a digital wholesale bank license will need to meet the same eligibility criteria as digital full banks, in addition to a minimum paid-up capital of S$100 million. Digital wholesale bank licensees will not be able to take Singapore dollar deposits from individuals, except for fixed deposits of at least S$250,000.
Note that companies applying for the license must be a Singaporean-owned and operated firm that as an established presence and sustainable digital banking model. There are several foreign companies whom are looking to apply. However, they must joint venture with a Singaporean-owned and operated firm and forfeit operations to said firm. We explore these companies deeper in the full report.
Past successful cases of the issuance of digital banking licenses have been observed in Hong Kong, the United Kingdom, Japan, South Korea and Vietnam. However, the only countries we have observed opening digital bank license applications publicly are Hong Kong, the UK, now Singapore and potentially Malaysia.
As the opening of application dates draw nearer, more and more companies that have large user databases, e-wallets or that provide financial services to local SMEs are announcing their interest in applying for a virtual bank license. Keeping in mind that MAS is particularly keen on granting license to firms that add value to the existing ecosystem. Meaning, they do not plan on granting licenses to firms that engage in value-destructive competition to gain market share. Commonly knowns are “disruptors”, these firms will not likely be chosen for a license as to not detract the anchoring position of local banks. Grab, GoJek and Razr Pay have all expressed interest. Validus Capital of India are eyeing a virtual license but must find a joint-venture based in Singapore first. Remittance service providers like InstaReM and Xfers have also announced recently their intent to apply.
From looking at the requirements, past successful cases and competitor landscape, we can draw suggestions for innovative features that SourceSage could consider adopting. Examples include, blockchain integration, a crypto-wallet, tiered membership accounts with additional premium features. A premium feature could be face or voice recognition for added security. Another may be budgeting features that generate personalised selection of local deals and coupons based on spending habits. Many virtual banks offer free withdrawal at 7/11s. Ideally, SourceSage would attain the ability to successfully offer remittance features in order to accommodate workers sending money to loved-ones overseas. Remittance services and cross-border payments continue to be an area of fintech that needs attention and refinement and SourceSage would like to address it.
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