Singapore is actively studying whether to allow companies with no banking parentage to set up virtual banks, paving the way for startups like on-demand services operator Grab to potentially enter the formal financial services industry.
Singapore Prime Minister Lee Hsien Loong / Photo credit: Brigitte Brantley
“Some other countries have created frameworks to license new players with no banking parentage to set up digital banks, that is banks without branches or ATMs,” Singapore Prime Minister Lee Hsien Loong said in a speech at the Smart Nation Summit in the city-state on Wednesday.
“The Monetary Authority of Singapore is now actively studying whether to allow this in Singapore, and hopefully we’ll have something to announce soon,” said Lee, referring to the country’s financial industry regulator.
Hong Kong in March handed out three virtual banking licenses in the city to allow financial institutions to operate branchless savings and lending businesses, as the financial services hub seeks to catch up with other Asian jurisdictions in disrupting traditional banking.
In China, five of the country’s largest tech companies have already been operating virtual banks since 2014. Hong Kong’s first virtual banking licenses were issued to online lender WeLab and three separate ventures led by Standard Chartered Bank, Bank of China (Hong Kong), and ZhongAn Online.
South China Morning Post understands that Grab will decide whether to apply for a virtual banking license, depending on the licensing conditions and if they qualify.
Grab declined to comment.
Lee said that Singapore is determined to achieve its Smart Nation vision as it is an “an essential strategy if Singapore is to remain an outstanding metropolis, abreast of the other centers of human creativity and enterprise in the US, Asia, or Europe.”
The Singapore government is committing “enormous public resources, but it cannot do this alone,” Lee said, welcoming collaboration with the private sector. He also warned against being “anti-tech or anti-science,” which would hold back progress.
Singapore announced the creation of an office dedicated to being the first stop for digital industry-related matters called Digital Industry Singapore. The agency will work with companies on various needs, such as securing talent and market access, developing capabilities, and going international, it said.
The country estimates that the digital ecosystem will create an estimated 10,000 new jobs over the next three years.
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