Singapore Banking industry is the third largest industry in Asia, after Japan and Hong Kong. The banking industry of Singapore is a key player in the country’s financial market segment and in the near future, it will emerge as one of the strongest in the world. Ancillary legal and tax policies, prominent integrity, stringent laws against crime, money laundering, sound economic fundamentals, political environment, highly skilled cosmopolitan workforce, supervisory framework, excellent infrastructure and a pro-business environment are some major factors that contributed to Singapore’s status as an international finance centre.
Singapore is a hub for most of the reputed financial institutions appending to the diversity, size and depth of Singapore’s financial sector, which includes the Asian dollar market, bond market, banking industry, foreign exchange market, equity/derivatives markets, insurance and asset management.
Factors that influence the success of the banking industry in Singapore include:
- Liberalisation of the domestic banking industry market.
- Mergers and acquisitions of local banks strengthened their regional presence.
- Increased competition encourages the development of the innovative products and competing pricing models more.
- The proliferation of foreign banks made Singapore a platform for important banking industry services not only at the regional level but also at the global level and also increased the competition.
- Identifying and serving the requirements of the Small and Medium Enterprises, in which Singaporean banking industry market also covered.
- Apart from traditional functions like lending and deposit-taking, they have started advanced banking services like corporate and investment banking activities, etc.
- Favourable conditions, such as tax-friendly policies, strict banking secrecy laws and wealth management services, etc formulated a private banking industry boom in Singapore.
Types of Banks in Singapore:
Banks in Singapore cater services to different types of clients, such as individuals, corporations or government agencies. These banks providing commercial banking services to businesses and corporates, retail banking services to individual members of the public, and private banking services to HNWIs. The banks are classified into two main categories:
- Local Banks
- Foreign Banks – this section is further subdivided into four sections:
- Full Banks: These banks are approved under the Banking Act and provide the whole range of banking business. Ten of the foreign banks include ABN AMRO, Standard Chartered, HSBC, Citibank, BNP Paribas and Maybank operating in Singapore have been awarded the Qualifying Full Bank (QFB) privileges.
- Wholesale Banks: These banks also engaged in the same banking activities as full banks, excluding Singapore Dollar retail banking activities. Wholesale banks in Singapore operate as a branch of foreign banks, such as Barclays Bank, National Australia Bank, Deutsche Bank and ING Bank, etc.
- Offshore Banks: These banks work same as full and wholesale banks for businesses transacted through their Asian Currency Units (an accounting unit, that book all foreign currency transactions conducted in the Asian Dollar Market). All offshore banks also operated as a branch of foreign banks in Singapore, such as Bank of Taiwan, Canadian Imperial Bank of Commerce, Bank of New Zealand and Korea Development Bank, etc. All dollar transactions of the bank in Singapore are separately booked in the Domestic Banking Unit (DBU).
- Merchant Banks: These banks provide mergers and acquisitions, management consultancy, portfolio investment management, underwriting of share and bond issues, corporate finance and other fee-based activities. Most of the merchant banks approved with the Monetary Authority of Singapore (MAS) and established Asian Currency Unit (ACU) through which they emulate with commercial banks in the Asian Dollar Market. In their Domestic Banking Unit (DBU) they manage deposits or borrow only from banks, finance companies, shareholders and the companies controlled by their shareholders. Examples: Barclays Merchant Bank Singapore Ltd, Axis Bank Ltd, Credit Suisse Singapore Ltd and ANZ Singapore Ltd, etc.
Major Local Banks:
- DBS (Development Bank of Singapore)
- OCBC (Overseas Chinese Banking Corporation)
- UOB (United Overseas Bank)
Major Foreign Banks:
- HSBC (Hong Kong and Shanghai Banking Corporation Limited)
- Standard Chartered
- ABN-AMRO Singapore
- BNP Paribas
Innovation in Singapore’s Banking Industry:
In 2015, the Monetary Authority Singapore (MAS) launched a program to promote more innovation in the financial services sector Financial Sector Technology and Innovation (FSTI) scheme by committing S$225 million ($169.8 million) into the industry. The initiate of the Fintech Fast Track is aligned with the agenda to broader the fintech sector in Singapore. This is the move taken by the government to encourage new startups to utilize technology in the field of the fintechs and other financial services. Fintech and Innovation Group (FTIG) is the agency that facilitates the use of technology and innovation, also regulates policies and development strategies for better managing the risks, in improving efficiency and also in strengthening the competition in the financial sector. Some initiatives are:
- Fintech Office: It is a one-stop point-of-contact for all fintech related dilemmas, set up by MAS & National Research Foundation (NRF). It provides the solution to the fintech companies who are interested to know about the available grants and schemes to assist them or connecting with the government agency for prompt approval, etc.
- Regulatory Sandbox: MAS came up with Regulatory Sandbox initiative to address the regulatory challenges and to make balance in between the innovation and security. The Regulatory Sandbox guidelines help the Financial Institutions and Fintech Companies in conducting experiments with minimising the threat and providing a fail-safe environment. Also supports in providing feedback from the industry experts and road-testing during their experimentation phase.
- Payments & Technology Solutions Office: This formulates regulatory policies and develops strategies simple, swift and secure payments and other technology solutions for financial services.
- Technology Infrastructure Office: It develops the safe and efficient technology-enabled infrastructure in areas such as big data, cloud computing and distributed ledgers for the financial sector.
- Technology Innovation Lab: It works with the industry and relevant parties to test-bed innovative new solutions with the potential application and cutting-edge technologies in the financial industry.
Notable Innovations for the Growth of Fintech Startups:
The Government of Singapore has incorporated Fintech Innovation Labs & Villages and has taken major steps to foster a favourable ecosystem to promote economic growth. A sector which is totally driven by young entrepreneurs requires incubators, accelerators, and sponsored innovation labs not only for funding, mentorship, and networking but also for the in-depth insight of the banking industry and also for some industrial exposure to enthusiastic startups.
- Incubators: It helps startups during their early stage in developing their idea into a business model. Incubation programs like PayPal Incubator, Joyful Frog Digital Innovation (JFDI), etc., focus more on nurturing budding Fintech Startups. 9 out of 10 startups fail at their early stages due to lack of guidance, planning, support and market research. PayPal’s incubation program is helping the young innovators who are working on the Fintech area primarily and also providing them with the initial infrastructure, mentorship and guidance. In addition, PayPal also providing an innovative environment and this program provides almost nine months of coaching and mentorship program to the startup by industrial experts in Singapore with access funding through PayPal’s extensive VC connections and network.
- Accelerators: These are like training schools for the development of the startups. These accelerator programs tend to invest in innovative ventures by providing them with capital and guidance for equity. The most popular Fintech focused accelerator programs in Singapore are Startupbootcamp Fintech Singapore, InspirAsia Accelerator, and The Open Vault at OCBC. Startupbootcamp Fintech is the most preeminent accelerator program focused on innovation in the financial sector. It provides for up to 12 selected Fintech and InsurTech startups across the globe, funding, mentorship, office space in Singapore and access to a global network of corporate partners, mentors, investors and VCs.
- Fintech Innovation Village: Singapore’s first Fintech innovation village is LATTICE80. These innovation villages support regulatory bodies, traditional financial institutions, and the corporates by bridging the gap between the public and private sectors in endeavouring to embrace innovation. This program helps the startups in providing space in Singapore’s financial district helping them to start-ups grow and expand their businesses.
- Innovation Labs: It is a platform for providing unique solutions to address the ever-evolving business needs of the startups and helps them in overcoming new challenges of the industry. It encourages the collaboration among the regulator, enthusiastic startups, traditional financial institutions, and technologists.
Rapidly Growing Sector of the Fintech Industry:
Singapore is becoming an influential hub for the premier asset management centres in Asia. Singapore is offering unparalleled access to global investors in the Asia Pacific markets – one of the world’s fastest-growing regions. In Singapore, today a broad and diverse community of asset managers are there. The asset management sector includes the examination of market size, major trends and developments, company news and key strategy, with key data and analysis of the largest investment management companies operating in the market. Also, incorporates the overview of the regulatory environment, profiling major regulators, company requirements and government policy.
High Net worth Individuals (HNWIs): Banks like HSBC are targeting high-net-worth individuals in Singapore. The bank is providing services, such as personalized investment solutions and advisory services to the customers who deposit at least £670,000 in cash and or in investments with HSBC, globally. According to the Boston Consulting Group’s 2018 Global Wealth Report and Capgemini’s World Wealth Report, HSBC highlights a 19% increase in personal wealth within Asia alone over the past year.
Active.Ai: A fintech startup, based in Singapore founded in 2016. The startup is using AI to help the banking industry and other financial institutions to engage with the customers intuitively and intelligently on mobile, chat, or voice-enabled IOT devices. It helps banks in redefining their digital strategy. The startups have two products:
- Morfeus: The product is the first AI-based, next generation of secure and scalable technology for financial services. It acts as an orchestration layer with the capability to consume the Trinity AI engine and enables banks to be ready for the conversational era.
- Trinity: It empowers the cutting-edge capabilities to financial institutions to offer a natural, personalised, intelligent and low-cost channel of engagement via voice and text to their customers. It is specifically for banking and finance and pre-trained relevant ontology that is built with the preprocessor, NLP, NLU, NLG and Machine Comprehension in mind.
Datarama: It is a platform for one-stop information for complex risk/opportunity assessment and due diligence in emerging markets. Their RegTech platform combines of the advanced technology with human analysis to streamline the traditional risk-consulting model, making compliance checks cheaper and faster. Datarama’s focussed platform is their unique and ever-evolving mapping tool. They specialised in gathering information of the private companies and also provide the assessment of the reputations of Asia’s businesspeople and identify investment opportunities of the clients.
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