“Banking Liberalisation’s Next Chapter: Digital Banks” – Keynote address by Mr Tharman Shanmugaratnam, Senior Minister and Chairman, MAS, at The Association of Banks in Singapore’s Annual Dinner, on 28 June 2019
Ladies and gentlemen,
Thank you for inviting me to join you this evening.
4. MAS embarked in 1999 on a major programme to open up and liberalise Singapore’s financial sector across the board, in banking, our securities markets and in insurance.
6. We took a calculated risk. The risk was not trivial, as we began opening up in the midst of the Asian financial crisis. The changes in banking in particular had to be paced out, to ensure that confidence in our local banks and the system as a whole was not shaken, and to give the banks time to regear and to grow new capabilities.
- The experience of the global financial crisis and its aftermath vindicated our view. A common feature of jurisdictions with systemically important financial centres that held up well through the crisis – notably Canada, Singapore, Hong Kong and Australia - was the presence of a handful of strong anchor banks in each of their systems.
- In 2012, we took steps to encourage foreign banks to deepen their roots in Singapore. MAS will allow a significantly rooted QFB to operate an additional 25 or up to 50 places of business, as part of an overall FTA package negotiated with the home countries of these QFBs.
- In September 2018, we announced that FinTechs and other non-bank financial institutions will be granted access to the FAST network for real time payments. This is a major step towards making our payments system open, accessible and competitive.
11. We must take advantage of these opportunities that digital finance brings, and not be overtaken by the wave of changes taking place globally.
- First, financing the growth of infrastructure in emerging Asia, and increasingly of climate-resilient, low-carbon investments. Both banking and capital markets should seek to meet what is still a huge financing gap in the region for critical and sustainable infrastructure.
- Second, financing growth enterprises and SMEs. SMEs are the backbone of all our economies. Besides finding new ways to meet their financing needs, banks can also help to raise their productivity by helping them adopt digital services.
- Third, reducing costs and improving convenience for consumers. We are already seeing major changes here, especially in cheaper, more convenient and seamless payments.
- Fourth, in helping people to plan early and achieve financial security in their later years. Singapore has recently come up top in the world for life expectancy. It is to be celebrated, but it also increases the need for good financial advice, and for those with savings outside their CPF accounts to be able to invest in products that will help them achieve greater retirement security. This is in fact going to be a growing challenge in much of Asia too.
- Finally, creating good jobs. In Singapore, the financial industry employs close to 200,000 people, most of them in relatively well-paying jobs. Technology will replace many tasks and even whole jobs in finance. But with proactive upgrading of skills to keep pace with new technologies, and with the continuing growth of our financial centre, we must and will provide good jobs in finance for many years into the future.
- FAST allows fast and secure payments for both consumers and businesses.
- Building on the FAST infrastructure, we were able to introduce further initiatives such as PayNow, which allows real time payment with the convenience and speed of mobile texting for the customers of all major retail banks, including the three local banks and 6 Qualifying Full Banks (QFBs)
These include Bank of China, Citibank Singapore Limited, HSBC, Industrial and Commercial Bank of China, Maybank, and Standard Chartered Bank..
- As mentioned, MAS has also announced that it will be working with the industry to open FAST access to non-bank players.
- The MyInfo platform allows banks to more effectively and efficiently obtain authenticated and updated information for account opening and other applications, doing away with the tedium of manual physical authentication and resulting in time saving of as much as 80% for banks and their customers.
- The Payments Services Act is a forward looking and flexible framework for the regulation of payment systems and payment service providers in Singapore. It gives regulatory certainty to new players to pursue innovation and growth, while at the same time providing sufficient safeguards for consumers.
- Since 2016, MAS has partnered industry players to bring together financial and technology players from all over the world in the week-long Singapore FinTech Festivals. Turnout has more than quadrupled over the past three years with 45,000 participants from 130 countries in 2018.
- It is early days yet, but the results of our efforts are encouraging. Singapore is widely regarded as one of the leading FinTech hubs in the world. A report by Ernst & Young finds that nearly 7 out of 10 Singaporeans have made use of FinTech solutions in 2019, making us a leader in the Asia-Pacific region.
- They have partnered with FinTechs to harness the capabilities of new technologies and deliver more customised solutions. For example, UOB has partnered with Personetics to use artificial intelligence to identify individual transaction demands and enable UOB to provide customers with real-time and personalised guidance on their financial decisions.
- Second, they have built digital banks in overseas markets, leveraging a lower-cost operating model to quickly acquire new customers. For example, DBS launched digibank in India and managed to acquire over 2.5 million customers in its initial two years of operations. The bank has also recently replicated its digibank strategy in Indonesia. DBS was ranked by Euromoney as the world’s best digital bank last year.
- Third, they have adopted more customer-centric approaches, integrating solutions for their financial and non-financial needs. For example, OCBC has built a niche marketplace to provide curated products and services for mothers and their babies. The bank also launched the OCBC Silver Years programme to provide seniors a one-stop solution for financial advice, insurance products and lifestyle options.
- In China, for example, MYBank, has broadened financial inclusion, with 80% of its clients being first time borrowers like mom-and-pop shops. 99% of its customers repay on time.
- In Korea, Kakao Bank has in its first year of operations attracted more than 6 million users.
31. We welcome firms with innovative value propositions to apply for the new digital bank licences, even if they have not yet established a track record in banking. They may apply for a digital full bank licence or a digital wholesale bank licence, as follows.
- A digital full bank will commence as a restricted digital bank to build up its business model and internal processes, and gradually progress to become a full functioning full bank. MAS will not prescribe a time period within which graduation to a digital full bank must be achieved.
- When the restricted digital bank first commences operations, it will be subject to an initial deposit cap of S$50 million, an individual depositor cap of S$75,000, and generally be allowed to accept deposits from only a small group of depositors such as business partners, staff, related parties and selected customers.
The eighth edition of the Singapore FinTech Festival came to a close on 17 November 2023, drawing a record 66,000 participants, up from 62,000 attendees in 2022.
MAS and Bank Negara Malaysia have jointly launched the real-time payment systems linkage between Singapore’s PayNow and Malaysia’s DuitNow.
MAS and Bank Indonesia have jointly launched the cross-border quick response payment linkage between Indonesia and Singapore.