Digital banks in Singapore

Note: Due to the ever-changing digital banking landscape, the list provided in the table above is not exhaustive.

What is a digital bank?

Digital banks (which include challenger banks or neobanks) have the capacity to offer the same type of bank services as traditional banks, without the heavy infrastructure and legacy systems that the latter operates on. They are highly adaptive and operates on cutting edge digital platforms with a focus on mobile banking.

With no physical branches, digital banks allow you to manage your finances entirely online, from an app or web-based platform on your electronic devices.

You can typically sign up for a digital banking account in minutes, get your card relatively quickly (a virtual card may even be generated for immediate use), benefit from convenient features such as overseas payments with zero foreign currency fees, spend analytics, budgeting tools and more.

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What are the differences between digital banks and traditional banks?

According to the Monetary Authority of Singapore (MAS), digital banks are expected to utilise technology to reach ‘under-served’ segments of the domestic market to differentiate them from existing banks.

MAS has also clarified that entities holding digital full banks licenses will:

• Only be allowed to operate one physical place of business
• Not have access to the network of ATMs or cash deposit machines

Here are the definitions between the various banking models and their features:

So the key difference between digital banks and traditional banks is that digital banks only operate online with no physical presence. This means that there’ll be no in-branch services and all banking activities will be conducted online.

In terms of the range of banking services, digital banks will not be bringing anything radically different to the table. So expect a similar (or a slightly smaller) set of products and services that you expect from existing banks, including savings accounts, fixed deposits, payments and loans.

What neobanks are available in Singapore?

The digital banking model is not entirely new in Singapore as various lenders or digital payments startups have been allowed to operate with MAS’s remittance licence.

These are known as neobanks, which do not have a banking license but are in partnership with financial institutions to offer bank-licensed services. There is a number of neobanks available in Singapore, including:

• Revolut. Revolut is a global banking app that offers budgeting tools, international currency exchange, travel insurance, cryptocurrency facilities, virtual cards and more.
• YouTrip. The first multi-currency wallet in Singapore, YouTrip is a convenient travel wallet linked with a prepaid Mastercard designed for frequent travellers to transact in over 150 currencies without any added fees. YouTrip also offers other features such as payments, currency exchange and forex lock-in rates.
• Aspire. Aspire is a digital business bank account. You can open an account in a few minutes and save on international transaction fees by receiving or spending in over 40 currencies at the real exchange rate.
• BigPay. BigPay is an e-wallet app and Mastercard offered by AirAsia and will be available in Singapore soon. It allows you to spend globally for a low cost while earning AirAsia BIG points. You can spend in 150 supported currencies, send money to bank accounts in various countries, use the app to manage your money and benefit from AirAsia privileges.
• Wise (formerly TransferWise). Along with a free debit Mastercard, Wise’s multi-currency account allows you to hold up to 28 currencies, conduct money transfers at competitive rates and enjoy fee-free overseas ATM withdrawals.

What are the benefits of a digital bank?

Digital banks strive to offer a seamless one-stop experience through an ecosystem of partners and money management features within a single platform.

Among the many perks of using a digital bank are:

• Fast and convenient sign-up. You can usually apply for a digital bank account in less than five minutes.
• Lower fees. Since digital banks have significantly fewer overheads to upkeep, the high cost of maintaining bank branches and bank staff can be translated into lower banking fees and higher interest rates for its customers.
• Low-cost foreign currency and travel spend. These banks usually offer 0% foreign currency spending or allow you to hold multiple currencies in your account at once. If you need to send international money transfers, have friends or family that live overseas, shop at overseas stores or travel, this can save you a lot of money.
• Smart security features. If you lose or misplace your card you can lock and unlock it in the app. Digital banking platforms are typically protected with multiple layers of encryption.
• Choice of accounts. Most digital banks offer multiple account options ranging from a $0 account to a premium account. If you want more features, you may need to pay a higher monthly cost.
• Spend analysis. Digital banking apps are equipped with advanced data analysis features to evaluate where your cash is going. Look for automatic spending categorisation, notifications, alerts and monthly reports.
• Budget syncing. Use the spending analysis to set up budgets and track progress. The app may allow you to set goals and spend limits to make veering off course more difficult.
• Automated savings. Some digital banks prioritise stashing cash away. For instance, rounding transactions to the nearest dollar and sending the difference to your savings account.
• Cryptocurrency trading. Unlike traditional banks, many digital banks allow users to buy, sell and trade cryptocurrencies within the app.
• Go green. With digitalisation, there’ll be fewer paper forms to fill and letters to discard.

Are there any drawbacks?

Some of these benefits have their downside too:

• Fees can be higher. Some mobile banks charge higher monthly fees for premium accounts, which offer additional features such as insurance, discounts, cashback and more.
• No access to ATM and cash deposit machines. MAS has stated that digital banks in Singapore will not be granted access to the ATM or cash deposit machine network.
• Cash and cheques usually aren’t supported. You can only transfer funds to your digital banking account through a credit card, debit card or bank transfer.

How are digital banks licenced in Singapore?

In June 2019, the Monetary Authority of Singapore (MAS) announced that it’ll grant up to five digital banking licences – two full banking licenses and three wholesale banking licenses – for non-banking entities to take deposits from retail customers. The application window closed at the end of 2019 with a total of 21 contenders.

The new digital banks are expected to commence operations from early 2022, so we can expect exciting new offerings in the coming years. However, the licensees for DFB and DWB are limited to the following:

Digital full bank (DFB)

This license allows the bank to serve retail and corporate customers and will create in three stages to becoming a full bank. For the first two years, DFBs will be subject to a number of restrictions imposed by MAS. Once the Restricted DFB has met all relevant milestones, it’ll progress to become a digital full-fledged bank with restrictions lifted.

Stage 1 – Restricted Digital Full Bank (Restricted DFB):

• Only allowed to offer simple credit and investment products
• Aggregate and individual deposits capped at S$50 million and S$75,000 respectively
• Can only accept deposits from a small group of persons such as business partners, staff and related parties.

Stage 2 – Digital Full Bank (DFB):

• Can provide a wide range of financial services and take deposits from retail and non-retail customers
• No deposit cap
• No business restrictions

Grab-Singtel consortium and SEA Group have been awarded this license.

Digital wholesale bank (DWB)

A DWB can only open and maintain deposit accounts for SMEs and corporates. These providers can also accept fixed deposits of at least $250,000 from individuals.

Banks awarded this licence:

• Ant Group
• A consortium comprising of Greenland Financial Holdings, Linklogis Hong Kong, and Beijing Co-operative Equity Investment Fund Management

Information provided above is accurate as of 7 December 2020.

Are digital bank accounts secure?

Digital banks are subject to the same capital requirements and regulatory requirements as traditional banks today, including Anti-Money Laundering (AML) and Know Your Customer (KYC) processes.

Backed by advanced technology and infrastructure, the security features of digital banks will generally include the following:

• Data encryption. The data is protected by encryption protocols such as Secure Sockets Layer (SSL) technology. This basically protects your data – including your credit card number and other personal information – from being accessed by third parties.
• Logout. You can log in to your account from only one device at a time. Also, if your app has been idle for some time, it’ll automatically trigger a session timeout.
• Two-factor authorisation. 2FA helps prevent unauthorised access to your account by requiring an additional One-Time Password (OTP) that’ll be sent to you via SMS or email.
• Security solutions. Servers and information systems are usually protected by intrusion detection, anti-malware systems and firewalls.
• Spend limit. You’ll be able to set an upper limit on daily or monthly transactions to mitigates risk in case of a security breach.

How to get started with a digital bank

You can sign up with a digital bank in Singapore by downloading your chosen bank’s app onto your smartphone.

To sign up, you’ll typically need to provide a few of your personal details, including your full name, date of birth, address and email address. This process typically requires you to take a front and back image of your government-issued ID, as well as a selfie for identity verification.

Once your application is successfully verified, you’ll need to deposit funds into your account to activate it and can begin using it.