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Singapore wants to become an Asian hub for digital banks: MAS
[SINGAPORE] Singapore's welcome mat to virtual banks is going beyond its own shores.
The island nation wants to become a regional hub for technology firms with advanced data expertise, said Ravi Menon, managing director of the Monetary Authority of Singapore (MAS). Doing so would improve banking services at home and in other parts of South-east Asia, he said.
"Singapore wants to be a base for these players as they grow in the region," Mr Menon, who has led the financial regulator since 2011, said in a recent interview. "And that means anchoring them here at the early stage of their development, and allowing them access to the domestic banking market."
South-east Asia, where millions of people are underbanked, presents an opportunity for providers of virtual banking services, especially loans. The market for lending via digital channels is expected to more than quadruple to US$110 billion by 2025, according to a report by Bain & Co, Google and Temasek Holdings.
Central to the monetary authority's fintech hub ambitions are its plans announced earlier this year to award as many as five digital banking licenses to non-banks, including three slots that are open to foreign firms. Applications are due by the end of December.
Singapore's traditional incumbents like DBS Group Holdings, Oversea-Chinese Banking Corp and United Overseas Bank already provide digital services through mobile phones and other channels. Still, more can be done by technology firms, according to Mr Menon.
"Some of these other players use a range of other data to make very quick assessments and are able to disburse these loans in a very short space of time," Mr Menon said. "Those kinds of things are not met adequately or as easily, or it would require tremendous additional cost or effort on the part of traditional banks."
Small and midsized firms in South-east Asia are underserved by existing banks, according to the Bain-Google-Temasek report. More than 70 per cent of adults, or about 296 million people, in the region have inadequate banking access, it found.
Mr Menon said he expects non-financial firms to work with traditional banks through joint ventures and other combinations.
That may become a reality soon, after peer-to-peer lender Validus Capital formed a partnership with OCBC and two other firms to seek one of the digital wholesale banking licenses that's up for grabs, Bloomberg reported this week.
"As with all competition, you will see some consolidation taking place, some creative destruction taking place," Mr Menon said. "What's most important for us as policy makers is to make sure that the consumer benefits."