COVID-19 increases need for digital banking in Singapore

 Last year, the Monetary Authority of Singapore announced its intentions to issue five digital banking licences. At the beginning of 2020, the MAS revealed that it had drawn interest from 21 applicants, including some of the biggest names in the game. All the MAS had to do was select the most suitable contenders and change the Singapore banking landscape forever. Then the COVID-19 pandemic hit and all carefully made plans were laid to waste. But if there’s one thing we can say we’ve already learnt from the ongoing crisis it’s that the digitisation of banking can’t come soon enough. Not only does the convenience of customers depend on it, their safety does too.

Digital Banking in Singapore

The MAS is widely regarded as a nimble and forward-thinking regulator. This is why it came as no surprise that the MAS was quickly moving ahead with plans to issue licenses to digital banks. The application quickly came pouring in, with the MAS announcing that it has received 21 applications for digital bank licenses at the close of the application period on 31 December 2019. Of these, 7 applications were submitted for the digital full bank (DFB) licenses, and 14 applications for the digital wholesale bank (DWB) licenses.

The European Example: Digital Banking That Works

Like the MAS, European regulators are keen on adoption of innovative, customer centric solutions. Leading the digital banking pack in Europe is the United Kingdom. The UK has now become a competitive hotbed for digital banks, with several eyeing penetrating markets very far from home. Britain’s Revolut was at one point an applicant for an MAS DFB license, before withdrawing its application. Their success has been nothing if not extraordinary, with so-called challenger banks now amassing millions of customers in Europe and worldwide.

The COVID-19 Disruption

At the beginning of the year, the MAS intended to announce the successful applications in June 2020. Now that June has come and gone under the cover of COVID-19, the MAS has been forced to change course as well. Successful applicants should be informed in the latter half of the year. The MAS in a statement to Reuters said that the financial stability of an applicant is now a key consideration when “assessing its ability to manage a prudent and sustainable digital banking business.”

Fitch Ratings, in a statement, said that the pandemic could deter weaker, aspiring online banks from competing for the licences, while more established players will likely be reassessing their digital strategies in light of the pandemic.

Customers Need Digital Banking

One can only hope that, whatever conclusions applicants reach in their deliberations, they do not abandon digital banking plans altogether. COVID-19 has disrupted far more than business cycles and digital banking licences applications. The widespread lockdowns endured by millions and billions of global residents have allowed customers of all cohorts to acquaint themselves with these services, and decisively demonstrate that we are long overdue for fully capable digital services the world over.

A recent survey by SingSaver found that 70% of respondents in Singapore have “frequently” used digital banking services during the beginning of the crisis, with 65% saying they are “somewhat” or “very” comfortable using these digital tools. This trend holds for Singapore’s older population, with 61% of respondents aged 54 and above saying they use such digital ban king tools frequently. Almost 70% of respondents in this age group say that that are “somewhat” or “very” comfortable with online banking tools. 

When the COVID-19 crisis ends and is nothing but a distant memory, we will be left with a radically different world. Whether we will go back to work as we did before or telecommute much more, whether we will consume less or reduce our spending and buying, one thing is certain: the transformation of consumer banking that we are undergoing now will be impossible to slow or stop. COVID-19 has demonstrated that digital banking is not a nicety, but an absolute must-have.

For more information on business topics in Asia Pacific, Australia and New Zealand, please take a look at the latest edition of Business Chief APAC.

Follow Business Chief on LinkedIn and Twitter.