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In banking sector shakeup, Grab-Singtel tie-up, Jack Ma-linked firm among 4 entities awarded digital banking licences by MAS

SINGAPORE — In a highly anticipated announcement, four entities, including China billionaire Jack Ma’s Ant Group and a Grab-Singtel tie-up, were on Friday (Dec 4) awarded digital banking licences by the Monetary Authority of Singapore (MAS).

The Monetary Authority of Singapore has awarded four digital banking licences, in a highly anticipated announcement, marking a significant shakeup of the local banking scene.

The Monetary Authority of Singapore has awarded four digital banking licences, in a highly anticipated announcement, marking a significant shakeup of the local banking scene.

  • MAS has awarded 2 full digital full bank licences to a Grab-Singtel tie-up and Sea Ltd, the parent company of Shopee
  • Digital full banks can take deposits from retail customers, so they are similar to conventional banks but with no brick-and-mortar presence
  • Two digital wholesale bank licences went to China’s Ant Group, linked to billionaire Jack Ma, and a consortium of three financial services firms
  • These licence operators mainly service small and medium sized businesses
  • All four banks are expected to commence operations from early 2022
  • This is the first time non-banks have been allowed to apply for banking licences

 

SINGAPORE — In a highly anticipated announcement, four entities, including mainland China billionaire Jack Ma’s Ant Group and a Grab-Singtel tie-up, were on Friday (Dec 4) awarded digital banking licences by the Monetary Authority of Singapore (MAS).

In what is seen as one of the biggest shakeups of the local banking sector in years, the successful applicants are expected to commence operations from early 2022.

Digital banks operate entirely online, with no brick-and-mortar presence. For the first time, the MAS opened up the licence applications to companies outside the banking sector.

In its media release, MAS said it had given one digital full bank (DFB) licence to a consortium of ride-hailing company Grab and Singapore Telecommunications (Singtel).

It has awarded a second DFB licence to internet platform provider Sea Ltd, the parent company of leading shopping platform, Shopee, among other businesses.

The DFB licence enables the operator to take deposits from retail customers — that is, the wider banking public.

MAS also awarded two digital wholesale bank (DWB) licences, enabling the operator to generally cater to small- and medium-sized enterprises and other non-retail banking customers.

One of these went to China’s Ant Group, which is an affiliate of the Alibaba Group, controlled by Jack Ma. Ant Group is reportedly the world’s most valuable financial technology firm.

The second DWB licence went to a consortium comprising Greenland Financial Holdings Group, Linklogis Hong Kong and Beijing Co-operative Equity Investment Fund Management.

Greenland Financial is part of Greenland Holdings, a real estate developer listed on the Shanghai stock exchange.

While digital banking is not new as MAS has allowed local lenders to pursue such business models since 2000, what is different is that non-banks are also allowed to apply for the licence.

Mr Ravi Menon, MAS managing director, said a rigorous, merit-based process was applied to select a strong slate of digital banks.

Of the DFB applicants, MAS said the Grab-Singtel consortium and Sea were “clearly stronger” than the other eligible candidates.

As for the DWBs, MAS said the two selected applicants “met its expectations and were assessed to be demonstrably stronger" than the other eligible candidates.

Still, as the DWBs were introduced as a pilot, MAS said it will review whether to grant more of such licences in the future.

“We expect (the new digital banks) to thrive alongside the incumbent banks and raise the industry’s bar in delivering quality financial services, particularly for currently underserved businesses and individuals,” said Mr Menon.

The application process for digital bank licences was kick-started two months after MAS chairman and Senior Minister Tharman Shanmugaratnam announced in June last year that up to five digital bank licences would be awarded — up to two DFB licences and up to three DWB licences.

MAS said there were a total of 14 eligible applications, which were assessed on the following criteria:

  • Value proposition of business model, incorporating innovative use of technology to serve customer needs and reach under-served segments

  • Ability to manage a prudent and sustainable digital banking business

  • Growth prospects and other contributions to Singapore’s financial centre.

On Friday, Mr Wong Nai Seng, Deloitte Southeast Asia's regulatory risk leader, called MAS' announcement a key milestone for Singapore's plans to develop a "Smart Financial Centre", and expects it to further accelerate the digitalisation of financial services.

Speaking of the challenges digital banks may face, Mr Wong said that aside from meeting regulatory requirements, they have to contend with an uncertain economic environment, low interest rates and competitive responses from the incumbent banks and other financial services players.

"The market will be watching closely in the coming months as the digital banks announce their visions of how they will serve Singapore customers," said Mr Wong.

"It will be interesting to see how these new entrants can better support individuals and companies in these challenging times by leveraging on technology."

Related topics

MAS digital banking Jack Ma Shopee Singtel

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