Delay of digibank results due to Covid-19 not a dial back in commitment

Singapore

PUSHING back the digital banking timeline is not a signal that Singapore is dialling back its ambitions on this front. Instead, it is giving contenders some breathing room to navigate the virus outbreak situation, said industry players.

This is in response to the Monetary Authority of Singapore's (MAS) announcement on Thursday that successful applicants of the five digital banking licences offered will be informed in the second half of 2020 - not June 2020 as originally intended.

The extension of the assessment period for the award of digital bank licences is to allow applicants to dedicate their resources and attention towards managing the immediate impact of Covid-19 on their businesses, said MAS in a statement.

This will also enable MAS to focus resources on safeguarding monetary and financial stability, and ensure that financial institutions remain resilient and able to perform their role in supporting businesses and individuals through this challenging time, it added.

With this development, it remains unclear if the digital banks will be starting operations by the middle of 2021, as earlier expected.

But industry players voiced support for the MAS's move and said that it did not come as a surprise, considering that the central bank had already deferred some regulatory initiatives and industry projects earlier this week.

Varun Mittal, EY Global Emerging Markets FinTech lead, said: "Digital banking and banking in general is a long-term commitment so it is crucial to ensure that the new banks are able to launch at the right time in an appropriate economic and social climate."

He noted that in some of the other jurisdictions that issued digital or payment bank licences, a majority of players could not launch in time after the in-principle approval due to factors beyond their control so it is "appropriate" to wait for things to stabilise.

In the grand scheme of things, the delay is not material and will not affect Singapore' digital banking ambitions, he said. "In line with the Singaporean spirit and principle, it is better to get the most important things right instead of just focusing on the speed."

Similarly, Wong Nai Seng, Regulatory Risk leader, Deloitte Southeast Asia, believes that MAS remains committed to its digital bank strategy. He added that the delay could also be an opportunity for contenders.

For instance, the expected economic slowdown will provide a window for digital banks to hire talented individuals with sought-after skillsets in technology and data analytics, he pointed out.

In January 2020, MAS said that it had received 21 applications for the five available digital bank licences. They comprise up to two digital full bank licences and three digital wholesale bank licences, aimed at enabling non-bank players with strong value propositions and innovative digital business models to offer banking services.

Digital full banks will be allowed to take retail deposits, and will require an eventual capital requirement of S$1.5 billion. They also need to be Singapore-headquartered and controlled by Singaporeans.

The digital wholesale bank licence will allow successful applicants to serve SMEs and other non-retail segments. There is a capital requirement of S$100 million, and foreign entities can take a majority stake.

Applicants that have gone public include a Grab-Singtel partnership; a consortium led by Razer; a solo bid by consumer Internet firm Sea; a consortium led by Hong Kong-listed Sheng Ye Capital; a grouping led by Hong Kong's AMTD Group; and another led by fintech MatchMove.

Digital banking applicants also rallied behind MAS's decision to delay the results, calling it prudent.

Jeff Tung, chairman of Sheng Ye Capital, said: "We are supportive of MAS's revised digital banking timeline. Our consortium members (including Phillip Capital and fintech Advance.AI) have weathered the storm well, and we look forward to be in a position to support the recovery of Singapore's SMEs and the broader economy."

Nisha Paramjothi, senior vice-president, Investments & Strategy, MatchMove noted that the most important objective now is to contain and overcome the pandemic.

"As such, we respect and support MAS's decision to delay the results, to ensure it gets the undivided attention and priority it deserves," she said, adding that it remains committed to its strategy and plans.

Lee Limeng, CEO of Razer Fintech, said that it has been engaging with MAS on queries and is still "highly focused on the opportunity" even as it assesses similar opportunities in other geographies in the meantime.