Virtual Banking Continues to Go Viral: Virtual banking spreads to Singapore as the heated race to tap into Asia’s unbanked markets ensues

August 14, 2019

2 min read

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What's going on here?

This month, the MAS (Monetary Authority of Singapore) will start the bidding process for 5 new virtual bank licenses in the Singaporean market.

What does this mean?

In the last few years, China, Hong Kong, Australia, Taiwan, Japan, Korea and India have been racing towards launching their own virtual banks in the Asia-Pacific banking market.  Singapore, as a newer member of Asia’s “Virtual Banking License” club, has followed Hong Kong’s recent launch of 8 virtual banking licenses (which you can read more about in our article here) by launching their own set of licenses.

Out of the 5 virtual banking licenses the MAS is planning to roll out, 2 will be fully digital banking licenses and the remaining 3 will be digital wholesale licenses (targeting SME and non-retail segments). The former offers a full range of financial services, whilst the latter specifically targets SMEs. These licenses will be integrated into Singapore’s banking eco-system, meaning local banks can launch their own digital banks and compete with Fintech competitors carrying the virtual banking license. So far, potential contenders include “Grab” a South East Asian ride-hailing giant, “Razer” the gaming hardware manufacturer and Singapore based telecommunication provider, “SingTel”.

What's the big picture effect?

Singapore’s virtual banking debut will make some serious waves for Southeast Asia’s niche, under-served and unbanked markets. Three categories targeted by Singapore’s digital banks include millennials, foreign domestic workers and SME’s.

For millennials, digital banks can deliver more tailored forms of services to address unmet lifestyle-focused financial needs, like Korean Kakaobank’s ability to withdraw money at the local 7/11s. For Singapore, this is a big untapped market considering millennial mobile banking engagement has jumped to 65% in 2019 (compared to only 43% in Hong Kong), indicating increasingly agile forms of digital banking will be welcomed. For foreign domestic workers, digital banks can tap into their unmet banking needs.  On this, Varun Mittal of EY states offering access to such accounts could set foreign domestic workers up to a solid financial foundation for other decisions like getting an insurance and savings plan.

For SME clients, digital banks can grant loans faster, safer and at a cheaper rate. This will create advantages for SMEs, who often struggle to secure funding from traditional banks due to lack of credit history. This is a golden opportunity for borderless banking in Singapore, as a report by McKinsey Global Institute estimates 39 million SMEs and 25 million unbanked adults across Southeast Asia are currently under-served by credit institutions. “The banks in Singapore are very good when it comes to providing basic services” Prajit Nanu CEO of InstaRem (a digital license contender) adds.

All in all, it is clear that Singapore’s move to virtual banking will bring benefits to different demographics across Southeast Asia. Only time can tell how successful digital banking will be for Singaporean Fintech hopefuls!

Report written by Roslyn Lai

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