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MAS opens the door to digital banking

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04 July 2019

The Monetary Authority of Singapore (MAS) has announced its intent to issue up to five digital bank licences, comprising:

  • Up to two digital full bank licences, which will eventually allow the provision of a wide range of financial services and deposit-taking from retail customers; and
  • Up to three digital wholesale bank licences, which will serve small and medium-sized enterprises (SMEs) and other non-retail segments.

The announcement made clear that firms with no track record in banking but with innovative value propositions are welcome to apply for a licence. All potential licensees must be able to show that they can meet an existing unmet or underserved need; their business model must not simply involve cannibalizing the existing market. As emphasized by Senior Minister and Chairman of the MAS, Mr Tharman Shanmugaratnam, in his key note address to the Association of Banks in Singapore on 28 June 2019, the view of the MAS is that “competition in finance has to be more than a zero sum game”.

With this announcement, Singapore joins the growing list of countries that have decided to open up the banking sector to digital banks. For example, in Hong Kong, the Hong Kong Monetary Authority (HKMA) published the Guidelines on Authorisation of Virtual Banks in May 2018, and has to date announced that it will be granting licences to eight licensees, who are expected to commence business within the next nine months.

This note will cover the licensing process and requirements in Singapore, as well as the likely potential challenges in the licensing process and the lessons we can draw from the processes undertaken in other jurisdictions, particularly, the United Kingdom, Australia and Hong Kong.

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