SINGAPORE – The Bank for International Settlements (BIS), dubbed the central bank for the world’s central banks, will establish an innovation hub centre in Singapore in a move that Singapore’s central bank said reflects the Republic’s position as a leading international fintech centre.
SINGAPORE will issue up to five new licences to digital banks and begin taking applications from August, in one of the biggest liberalisation steps taken by the city-state in years.
The maximum of five new digital-bank licences to be issued in time will comprise up to two digital full-bank licences, and up to three digital wholesale bank licences. They must all meet the same capital requirements as local banks. This is in addition to any digital banks that the local banking groups may also establish.
This was announced on Friday night by senior minister and the chairman of the Monetary Authority of Singapore (MAS) Tharman Shanmugaratnam at the annual Association of Banks in Singapore (ABS) dinner.
“The new digital bank licences mark the next chapter in Singapore’s banking liberalisation journey,” said Mr Tharman.
The digital full-bank licence will allow licensees to provide a wide range of financial services and take deposits from retail customers. A digital wholesale bank licence will allow licensees to serve SMEs and other non-retail segments.
The aim, The Business Times (BT) understands, is to tackle the segments that may be underserved, such as small businesses. This is done without compromising the anchoring position of the local banks, which hold a significant market share collectively, to prevent systemic risk.
BT also understands there have been informal talks with potential applicants – from both Singapore and overseas – that are keen to tap this new licensing framework.
Application for the digital full-bank licences is open to companies headquartered and controlled by Singaporeans. Foreign companies can apply for these full-bank licences if they form a joint venture with a Singapore company. Applicants must have a track record in operating an existing business, or in technology and e-commerce fields. They must also show clearly how they can tackle unmet needs, and show it has a sustainable digital banking business model. Any competition deemed to be “value-destructive” will not qualify.
At the first stage, the digital non-wholesale bank – that is, the digital full bank – will operate as a restricted bank.
This restricted digital full bank will have an initial paid-up capital of S$15 million. Aggregate deposits will be capped at S$50 million and an individual’s deposits will be capped at S$75,000. To add, the bank can only accept deposits from a small group of persons such as business partners, staff and related parties. With that, it will have to participate in the deposit insurance scheme, which protects deposits of up to S$75,000 per depositor in the event of the bank’s failure.
Such a digital bank – at its restricted stage – can only offer simple credit and investment products. It cannot offer complex investment products such as structured notes, and cannot engage in proprietary trading. It will also be restricted in banking operations in no more than two overseas markets, and must be incorporated in Singapore. Its liquidity requirement will stand at 16 per cent of minimum liquid assets.
Once MAS deems that the restricted digital full bank performs to show, among other things, good quality of loans, and a well-managed business, the restricted digital full bank will be graduated to a full functioning digital bank by the regulator. No timeline has been set by MAS on this front. But at that point, a graduated bank will need to meet the minimum paid-up capital requirement of S$1.5 billion, and face the same liquidity requirements as local banks, which means a 100 per cent in net stable funding ratio, and 100 per cent in liquidity coverage ratio.
The application for up to three digital wholesale bank licences for SMEs and other non-retail segments is open to all companies – both Singapore and foreign ones. For such applicants, the minimum paid-up capital is S$100 million. They cannot take Sing-dollar deposits from individuals, except for fixed deposits of at least S$250,000. But they can open and maintain business deposit accounts for SMEs and corporates.
This comes as Hong Kong in March opened its doors to virtual banks, with some arguing that it is playing catch-up to the digital banking trend.
Singapore – a heavily banked country – has already seen several of the traditional banks here investing heavily in digital capabilities in recent times. The local banks are also fairly well-entrenched, with Singapore’s top three banks estimated to hold a combined market share of just over 50 per cent. The market will watch if virtual banks – with their nimbleness but a much smaller asset base – will be able to wrest market share from the big guns here.
Hong Kong has already issued eight licences, with the most recent batch of four licences given out to entities linked to China’s top technology companies including Ping An, Ant Financial and Tencent. The earlier batch of licences went to applicants that are joint ventures between traditional banks and non-bank entrants. These virtual banks in Hong Kong are roughly expected to begin operations in six to nine months.
Six companies in Singapore will pilot new business models for moneylending, which would grant borrowers better terms if they repay their loans early or on time, said the Ministry of Law on Tuesday (Dec 11).
The new models will also include more comprehensive use of data to assess creditworthiness, as well as use digitalised processes to lower cost.
Of the six firms, three – Credit 21, Dey and Quick Credit – can apply to operate four moneylending outlets each. IFS Capital, Minterest and Xingang Investment are allowed to operate one outlet each.
“The six firms will be issued moneylending licences to operate the outlets they apply for, in a one-time lifting of the moratorium imposed on the issuance of new licences.”
In 2012, a moratorium was imposed on new licenses for moneylenders. Since then, the number of moneylending outlets has decreased from 215 to 162 outlets.
“The six firms will be allowed to apply for licences for up to 15 new outlets in total, and this represents less than 10 per cent of the 162 outlets currently operated by the 157 licensed moneylenders,” said the ministry.
The licensee will be allowed to operate for up to two years from next year onwards. The ministry will then evaluate the results of the pilot and consider options for refining the moneylending regulatory regime, it added.
The firms, which were selected among 38 applicants, were chosen as they met a set of stringent mandatory criteria, the Law Ministry said.
These include the soundness and completeness of the business model, participation in debt assistance schemes, professional debt recovery practices, customer and communication strategies and effective cost of credit and credit policies.
They also have paid-up capital of at least S$1 million and a track record in providing consumer credit, said the ministry.
Read more at Channel News Asia.
A single trade today can involve more than 25 parties, generating 30 to 40 documents and requiring 60 to 70 per cent of the information to be manually re-entered at least once.
But a new online trading service, which combines all customs and trade-related services into one platform, aims to cut back on such onerous paperwork.
The Networked Trade Platform (NTP), launched on Wednesday (Sept 26), brings together four government certification services required for trading in and out of Singapore, as well as another 25 value-added services by third-party firms geared towards trade. Three more government services will be moved to the new platform in the coming months.
The new service will eventually replace the Government’s existing TradeXchange and TradeNet platforms. It aims to raise productivity by digitalising the paper trail, boost competitiveness by giving more accurate data analysis and create opportunities for the third-party service providers.
Finance Minister Heng Swee Keat, who launched the NTP at the Orchard Hotel on Wednesday, said the Government had sensed that more needed to be done with previous efforts in TradeNet and TradeXchange.
He noted that a single trade today can involve numerous parties and documents.
“Numerous digital solutions have sprung up around the world to address this. But, many of these function as either a purely regulatory or purely commercial platform,” he said.
“If we can stitch the disparate standalone systems or digital islands together, and bridge the government agencies and business community, the potential value to the economy is significant and transformational.”
First mentioned in Mr Heng’s 2016 Budget speech, the platform went live in December last year, with around 800 companies from various industries joining it to date.
Originally known as the National Trade Platform, it was renamed at the launch event attended by close to 700 industry representatives from the trade, logistics and the public sector.
The NTP was developed by the Singapore Customs and the Government Technology Agency of Singapore (GovTech) over four years, and supported by more than 20 ministries, government agencies and working groups.
Firms have to pay a monthly $40 fee to use the platform.
The Government had conducted discussions and workshops with more than 400 industry experts and 200 organisations, said Dr Tan Kim Siew, co-chair of the National Trade and Logistics Inter-Agency Steering Committee (NTLSC).
Many participants highlighted the industry’s paper-based processes, which require time-consuming manual data entry. Coordination with multiple business partners, including banking, insurance and logistics services, also led some traders to develop expensive proprietary digital systems.
“The NTP must help to achieve paperless trade and greater operational efficiency for our traders. Traders must be able to transact digitally with all their partners,” said Dr Tan.
The digital platform can also enable cross-border trade linkages through technology.
Mr Heng said the Singapore Customs is currently in discussion with China on linking the trading systems of both nations, and the Netherlands on trade regulatory processes.
Asean member states are also looking into extending its Asean Single Window initiative to transmit more trade documents, achieving greater economic integration and expand intra-Asean and intra-Asia trade, said Mr Heng.
Building on the NTP’s capabilities, one workgroup is also developing a digital information exchange project to speed up agricultural trade by removing the requirement for traders to print hardcopy certificates, he added.
The NTP can be found at www.ntp.gov.sg.
This article was contributed by The Straits Times.
The Singapore Fintech Association announces the launch of the Marketplace Lending committee in response to the rapid growth in the sector. Minterest is proud to be 1 of the founder members of this committee.
The SFA subcommittee in dedicated to ensuring the local crowdlending industry is a trusted, credited and viable mode mode of financing for businesses in Singapore.
In 2016, Southeast Asia’s alternative finance market reached a record US$215.94 million, a growth of 362% compared to 2015. Data for 2016 showed that Singapore’s alternative finance market size was valued at US$163.75 million, more than double the entire value from 2013-2015. This upward trend is reflected internationally.
The global lending market valued at US$3.5 billion in 2013, expecting to reach US$1 trillion by 2050, according to Statista, a market research company.
The core committee is representative of senior crowdlenders in Singapore: Crowdo, Funding Societies, Minterest, New Union and Validus Capital. All of them are licensed by the Monetary Authority of Singapore of the Capital Market Service License.
Their initial tasks are to design and promote the best practices, industry guidelines and codes of conduct in a collaborative and open manner. This is to encourage transparency between market participants.
Eddie Lee, head of Marketplace Lending Committee, CEO New Union
“Our shared purpose is to support the common interests of the industry. We are looking to nurture and build relationship among crowdlenders, financial institutions, regulators and other stakeholders.”
The committee launch was celebrated via an industry event on Wednesday evening, with the return of the Fintech Titans debate series and a lively panel discussion. Topics under debate included the current lending landscape in Singapore, with insights shared from 5 lending founders.
Chia Hock Lai, President SFA
“With a growing lending marketplace in Southeast Asia, we felt there was a need for a consolidated and cohesive voice to lead the way among the community. Through this committee, we aim to enable Singaporean businesses to access to necessary financing options.”
This article was contributed by Fintech News Singapore
Over two thirds or 60 per cent of SMEs that sought external financing this year did so for cash flow management, said Spring Singapore in a statement disclosing the findings from its second edition of the SME Financing survey.
Bank loans were the most popular form of external financing across SMEs of different sizes, industries and stages of development.
The majority of the remaining 87 per cent that did not turn to external financing, indicated sufficient funds to operate, while a smaller proportion (9 per cent) indicated a personal preference not to borrow.
The survey also found that larger SMEs were more likely to seek external financing given their growth needs and the approval rate for debt financing was higher compared to micro companies (companies with revenue below S$1 million). On the other hand, micro companies faced lower approval rates largely due to the lack of financial documents and/or weaker business performance to support their debt application.
Spring Singapore also said that a top finance-related challenge for SMEs was managing delays in customers’ payment which affected cash flow and working capital management.
This article was contributed by The Business Times.