Last Updated on January 24, 2023 by admin
After Japan and Hong Kong, Banking System of Singapore is the third largest in Asia. As a result, Singapore’s banking business is a vital player in the country’s financial market segment, and it will soon emerge as one of the strongest in the world.
Some of the major factors that contributed to Singapore’s status as an international finance center are ancillary legal and tax policies, prominent integrity, stringent laws against crime, money laundering, sound fundamentals of the economy, the political climate, a workforce of highly skilled internationals, a supervisory framework, excellent infrastructure, and an environment favorable to business.
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.
Types of Banks in Singapore:
Banks in Singapore provide services to a wide range of customers, including individuals, businesses, and 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 offer a full range of banking services. Ten foreign banks operating in Singapore, including ABN AMRO, Standard Chartered, HSBC, Citibank, BNP Paribas, and Maybank, have been granted Qualifying Full Bank (QFB) rights.
- Wholesale banks: These banks engage in the same banking operations as full banks, except Singapore Dollar retail banking. Wholesale banks in Singapore are branches of foreign banks such as Barclays Bank, National Australia Bank, Deutsche Bank, and ING Bank, among others.
- Offshore Banks: These banks conduct business through their Asian Currency Units in the same way as full and wholesale banks do (an accounting unit that books all foreign currency transactions conducted in the Asian Dollar Market). All offshore banks also served as branches of foreign banks in Singapore, including the Bank of Taiwan, the Canadian Imperial Bank of Commerce, the Bank of New Zealand, and the Korea Development Bank, among others. The Domestic Banking Unit records the bank’s dollar transactions in Singapore (DBU).
- Merchant banks provide:
- Mergers and acquisitions.
- Management consulting.
- Portfolio investment management.
- Share and bond underwriting.
- Corporate finance.
- Other fee-based services.
Most merchant banks obtained approval from the Monetary Authority of Singapore (MAS). They formed Asian Currency Units (ACUs), which they use to compete with commercial banks in the Asian Dollar Market. They only manage deposits or borrow from banks, finance businesses, shareholders, and companies owned by their shareholders in their Domestic Banking Unit (DBU). A few examples are Barclays Merchant Bank Singapore Ltd, Axis Bank Ltd, Credit Suisse Singapore Ltd, and ANZ Singapore Ltd.
Innovation in Singapore’s Banking Industry:
The Monetary Authority of Singapore (MAS) created the Financial Sector Technology and Innovation (FSTI) plan in 2015, investing S$225 million ($169.8 million) in the industry to stimulate more innovation in the financial services sector. The launch of the Fintech Fast Track aligns with Singapore’s goal of expanding the fintech sector.
The government is taking this step to encourage new businesses to use technology in the sector of fintech and other financial services. The Fintech and Innovation Group (FTIG) is an entity that promotes the use of technology and innovation while simultaneously regulating rules and developing strategies for better risk management, efficiency, and competitiveness in the financial sector.
Among the initiatives are:
- Fintech Office: Established by MAS and the National Research Foundation, it is a one-stop shop for all fintech-related issues (NRF). It offers a service to fintech companies interested in learning about possible grants and programs to help them or engaging with government agencies for quick clearance, among other things.
- Regulatory Sandbox: The Regulatory Sandbox program was developed by MAS to address regulatory difficulties and strike a balance between innovation and security. The Regulatory Sandbox rules assist financial institutions and fintech firms in conducting experiments while minimizing risk and providing a fail-safe setting. Additionally, they assist in delivering feedback from industry experts and road-testing during their experimentation phase.
- Payments & Technology Solutions Office: This office sets regulatory policies and strategies for simple, fast, and secure payments, as well as other financial technology solutions.
Notable Innovations for the Growth of Fintech Startups:
Singapore’s government has established Fintech Innovation Labs and Villages and has taken significant steps to develop a favorable ecosystem to encourage economic growth.
A sector driven entirely by young entrepreneurs necessitates incubators, accelerators, and sponsored innovation laboratories not only for funding, coaching, and networking but also for in-depth knowledge of the banking industry and some industrial exposure to eager companies.
- Incubators: These organizations assist companies in the early stages of developing their idea into a business model. Incubation programs such as PayPal Incubator, Joyful Frog Digital Innovation (JFDI), and others primarily focus on supporting aspiring Fintech startups. However, due to a lack of guidance, planning, assistance, and market research, 9 out of 10 startups fail in their early phases. PayPal’s incubation program assists emerging entrepreneurs, mostly working in the Fintech sector, by giving them initial infrastructure, mentorship, and direction. Furthermore, PayPal is creating an innovative atmosphere, and this program provides nearly nine months of coaching and mentorship to the business by industrial professionals in Singapore, as well as access to finance through PayPal’s enormous VC connections and network.
- Fintech Innovation Village: LATTICE80 is Singapore’s first Fintech innovation village. These innovation villages help regulatory agencies, traditional financial institutions, and corporations embrace innovation by bridging the gap between the public and private sectors. In addition, this initiative assists entrepreneurs by offering them space in Singapore’s financial sector, allowing them to build and expand their enterprises.
- Innovation Labs: It is a platform for giving unique solutions to startups’ ever-changing business demands and assisting them in overcoming new industry difficulties. It promotes collaboration between regulators, eager startups, traditional financial institutions, and technology.
