Category Archives: Fintech

MAS Announces Successful Applicants of Licences to Operate New Digital Banks in Singapore

The Monetary Authority of Singapore (MAS) announced four successful digital bank applicants.
 
2     The applicants selected for the award of banking licences to operate digital banks are as follows:

 Digital Full Bank (DFB)

  • A consortium comprising Grab Holding Inc. and Singapore Telecommunications Ltd.
  • An entity wholly-owned by Sea Ltd.

Digital Wholesale Bank (DWB)

  • A consortium comprising  Greenland Financial Holdings Group Co. Ltd, Linklogis Hong Kong Ltd, and Beijing Co-operative Equity Investment Fund Management Co. Ltd.
  • An entity wholly-owned by Ant Group Co. Ltd.

The successful applicants must meet all relevant prudential requirements and licensing pre-conditions before MAS grants them their respective banking licences. MAS expects the new digital banks to commence operations from early 2022. 

3     MAS had previously announced that it would award banking licences for up to two DFBs and up to three DWBs. There were a total of 14 eligible applications. The applications were assessed on the following criteria:

  • value proposition of business model, incorporating innovative use of technology to serve customer needs and reach under-served segments;
  • ability to manage a prudent and sustainable digital banking business; and
  • growth prospects and other contributions to Singapore’s financial centre.

The assessment was done on a holistic basis, taking into account all relevant considerations for each criterion. MAS also took into consideration the eligible applicants’ reviews of the business plans and assumptions underpinning their financial projections arising from the impact of the COVID-19 pandemic [1] .

4     To select the successful applicants, MAS set stringent expectations across the assessment criteria. The two selected DFB applicants were clearly stronger than the other eligible DFB applicants. As for the DWBs, the two selected applicants met MAS’ expectations and were assessed to be demonstrably stronger across the criteria notwithstanding the general high quality of the eligible applicants. MAS has thus decided to award banking licences to the two DWBs. As the DWBs are introduced as a pilot, MAS will review whether to grant more of such licences in the future.

5     Mr Ravi Menon, Managing Director of MAS, said, “MAS applied a rigorous, merit-based process to select a strong slate of digital banks. We expect them to thrive alongside the incumbent banks and raise the industry’s bar in delivering quality financial services, particularly for currently underserved businesses and individuals. They will further strengthen Singapore’s financial sector for the digital economy of the future.”

 ***


Additional Information:

In June 2019, MAS announced the digital bank framework, which aims to enable non-bank players with strong value propositions and innovative digital business models to offer digital banking services. DFBs will be provide a wide range of financial services and take deposits from retail customers, while DWBs will focus on serving SMEs and other non-retail segments.

These new digital banks are in addition to any subsidiaries that Singapore-incorporated banking groups may already establish under MAS’ existing regulatory framework, including with joint venture partners, to operate new or alternative business models such as a digital-only bank.  

Details of the assessment criteria can be found on MAS’ website.

Gradual change seen in euro area payment behaviour

• Cash most popular instrument for in-person retail payments, but use gradually declining
• Card payments becoming increasingly contactless
• Survey suggests coronavirus pandemic has accelerated use of cashless payment methods
Euro area consumers are gradually shifting towards cards for in-person retail payments, although cash
remained the most used instrument at the end of 2019, data published today by the European Central
Bank (ECB) show.
Last year euro area adult consumers used cash for 73% of their point-of-sale and person-to-person
retail transactions (48% in value terms). In a previous ECB study conducted in 2016, the figure was
79% of these transactions (54% in value terms).
The use of cards for in-person retail payments increased by 5 percentage points over the same three
years, from 19% to 24% (41% in value terms). Almost four out of ten card transactions were made
using contactless technology in 2019.
For their online shopping, euro area adult consumers paid mainly by card (49% of transactions) and
one out of four online transactions was made using e-payment solutions. Four out of ten bill payments
were made using direct debit and two out of ten by credit transfer.
In order to understand the potential impact of the ongoing pandemic on consumers’ payment behaviour,
the ECB complemented its 2019 study with an ad hoc survey carried out in July 2020. Four out of ten
respondents replied that they had used cashless often since the start of the pandemic. While most of
those who fell into this category expected to continue to do so after the pandemic, the long-term impact
on payment behaviour is still uncertain.
“Consumers’ freedom to choose their payment method is of the utmost importance to us. Therefore we
aim to ensure acceptance of and access to cash throughout the euro area, while promoting innovation on digital payments, including in our work on the possible issuance of a digital euro,” said Executive
Board member Fabio Panetta.
The data published today will help the ECB and the national central banks of the euro area to better
understand consumer demand and market trends, as well as to implement the Eurosystem’s retail
payments and cash strategies. These include the promotion of competitive, innovative and resilient
pan-European market solutions, as well as a commitment to keep cash accessible and accepted as a
means of payment throughout the euro area.

The future of money – innovating while retaining trust

Article by Christine Lagarde, President of the ECB, in L’ENA hors les murs magazine

Paris, 30 November 2020

Important lessons can be drawn from the past to understand the factors influencing the journey towards the future of money, including the possible introduction of a digital euro. Ensuring the euro meets the needs of European citizens is at the core of the ECB’s mandate.

Throughout history, the nature of money has evolved in response to socioeconomic changes. But the functions of money – as a means of exchange, a unit of account and a store of value – have remained the same for centuries.

One reason why money first emerged was to overcome the limitations and inefficiencies of bartering. As economies became more specialised, trade became all the more essential, and a universal medium of exchange was needed to facilitate it. Coins made from (precious) metals fulfilled that purpose for centuries.

But with the development of international trade, coins became increasingly impractical because they are difficult to store and transport in large volumes.

This led to the next phase in the evolution of money through medieval times into the late middle ages and early modern times. Developments included the advent of Templar’s credit notes in France, private giro banking in Italy, bills of exchange and promissory notes, and the first predecessors of paper money.

Role of the public sector

All of these instruments foresaw convertibility into precious metal coins. The acceptance of these forms of dematerialised and easy-to-carry money depended on the reputation of the issuer, and credit risk became relevant.

This led to the public sector playing an increasingly important role in issuing money and ensuring its value remained stable. Examples include the emergence of early public giro banks at the beginning of the 15th century and the first attempts to issue modern banknotes in the second half of the 17th century.[1]

In today’s modern economies, including in the euro area, money is no longer convertible into, or backed by, any commodity. Fiat money, as it is known, serves as legal tender by decree of the government or even constitutional legislation (such as the EU Treaty[2]). The value of money is based on citizens’ trust in it being generally accepted for all forms of economic exchange and in the ability of central banks to maintain its purchasing power through monetary policy. Central banks’ institutional independence also bolsters their ability to maintain trust in money.

Since early modern times central banks have gradually been assuming an increasingly pivotal role in ensuring that money delivers on the three functions I outlined. They must be fully aware of and adapt to changing realities.

Technological progress

As we enter the digital age, the nature of money, but also of goods and services, is changing quickly. Digitalisation and technological advances are transforming all areas of society, accelerating the process of dematerialisation.

Non-cash payments continue to increase. In the euro area, over the last year the total number increased by 8.1% to 98 billion. Nearly half of these transactions were made by card, followed by credit transfers and direct debits.[3]

The coronavirus (COVID-19) pandemic has accelerated this trend towards digitalisation, with a surge in online payments and a shift towards contactless payments in shops.[4] Market participants expect payments to be the financial service that will be most affected by technological innovation and competition over the next five years, according to a survey conducted in 2019.[5]

To meet the demand for digital means of payment, new forms of private money (i.e. a liability of private entities) have emerged. They are available as commercial bank deposits which can be used for transfers and direct debits, and as electronic money through credit cards and mobile payment apps.

In the euro area, the Eurosystem’s supervision mechanisms ensure commercial banks and payment service providers are effective and safe. This enables people to continue to have confidence in private money, which remains an integral part of our financial system.

But central bank money in digital form is still not available for retail payments.

Digital euro

The ECB wants to ensure the euro remains fit for the digital era. Early this year, the Governing Council decided to explore the possibility of issuing of a digital euro – digital central bank money for retail payments, in other words.

The Eurosystem is assessing the implications of the potential introduction of a digital euro, which in legal terms would be a liability of the central bank. In October the ECB published the Report on a digital euro[6] and launched a public consultation[7].

But why issue a digital euro, if other forms of (private) digital money are already available?

Central bank money is unique. It provides people with unrestricted access to a simple, essentially risk-free and trusted means of payment they can use for any basic transaction. But for retail use it is currently only offered physically in the form of cash.

A digital euro would complement cash and ensure that consumers continue to have unrestricted access to central bank money in a form that meets their evolving digital payment needs.

It could be important in a range of future scenarios, from a decline in the use of cash to pre-empting the uptake of foreign digital currencies in the euro area. Issuing a digital euro might become necessary to ensure both continued access to central bank money and monetary sovereignty.

A properly designed digital euro would create synergies with the payments industry and enable the private sector to build new businesses based on digital euro-related services.

A digital euro would also be an emblem of the ongoing process of European integration and ultimately help to unify Europe’s digital economies.

Crypto-assets pose risks

But what about bitcoin or other crypto-assets that have been trying to gain a foothold in the digital payments space and to anchor trust in their technology?

Innovations like distributed ledger technology (DLT), in particular blockchain (which is at the core of crypto-assets such as bitcoin), bring both new opportunities and new risks.

Transactions between peers occur directly, with no need for a trusted third-party intermediary. The trust that is usually inherent in a transaction is replaced by cryptographic proofs and the security and integrity of records is ensured by DLT, which avoids the “double-spending” problem. Nevertheless, trust is not entirely dispensable.

The main risk lies in relying purely on technology and the flawed concept of there being no identifiable issuer or claim. This also means that users cannot rely on crypto-assets maintaining a stable value: they are highly volatile, illiquid and speculative, and so do not fulfil all the functions of money.[8]

Recently, we have seen the emergence of stablecoins, which try to solve crypto-assets’ problem of a lack of stability and trust by pegging their assets to stable and trusted fiat money issued by States.[9] And the issuers of “global” stablecoins, which target a global footprint, further aim to introduce their own payment schemes and clearing and settlement arrangements.[10]

Although stablecoins could drive additional innovation in payments and be well integrated into social media, trade and other platforms, they pose serious risks.

If widely adopted, they could threaten financial stability and monetary sovereignty. For instance, if the issuer cannot guarantee a fixed value or if they are perceived as being incapable of absorbing losses, a run could occur. Additionally, using stablecoins as a store of value could trigger a large shift of bank deposits to stablecoins, which may have an impact on banks’ operations and the transmission of monetary policy.[11]

Stablecoins, particularly those backed by global technology firms (the “big techs”), could also present risks to competitiveness and technological autonomy in Europe, as they would attempt to leverage their competitive advantage and control of large platforms. Their dominant positions may harm competition and consumer choice, and raise concerns over data privacy and the misuse of personal information.[12]

“Money is memory”

In general, end users prioritise ease of use and smooth integration with other apps or services, and therefore welcome new solutions in exchange for providing their personal data. Public authorities are open to innovation and are prepared to act as catalysts for change, while implementing appropriate policy measures to ensure this innovation helps consumers rather than hindering them.

Payment providers and their payment solutions must be subject to appropriate regulation and oversight – in accordance with the principle of “same business, same risks, same rules” – to protect users and safeguard the stability of the economy against new risks that even go beyond financial ones.

Some say that “money is memory”[13], and it seems that this memory is becoming increasingly digital. But consumers’ digital data and records must not be misused. The abuse of personal information for commercial or other purposes could endanger privacy and harm competition. These and other potential risks are being assessed by the Eurosystem and European institutions.

At the same time, public authorities must balance the benefits and risks of innovation in payments and be prepared to take a leading role in ensuring that payments remain efficient, safe and inclusive in the digital age.

As the economy continues to evolve and new expectations about the nature of money emerge, the Eurosystem must be ready to respond and ensure that European payments adapt to changing consumer preferences and remain inclusive and efficient.

Despite all the changes I have mentioned, the foundations of money remain intact. People accept money only if it is highly trusted, maintains its value and respects privacy – an aspect that is becoming increasingly important in the digital age. These foundations have been and will continue to be found in central bank money, irrespective of the form it takes in the future.[1]Bindseil, U. (2019), Central Banking before 1800: A Rehabilitation, Oxford University Press; Le Goff, J. (2010), Le Moyen Age et l’argent, Perrin.[2]Article 128(1) of the Treaty on the Functioning of the European Union.[3]ECB (2020), “Payments statistics: 2019”, 11 September.[4]ECB (2020), “Impact of the pandemic on cash trends (IMPACT)”, forthcoming.[5]Petralia, K., Philippon, T., Rice, T. and Véron, N. (2019), “Banking Disrupted? Financial Intermediation in an Era of Transformational Technology”, Geneva Reports on the World Economy, No 22, International Center for Monetary and Banking Studies and Centre for Economic Policy Research, 24 September.[6]ECB (2020), “Report on a digital euro”, October.[7]ECB (2020), “Public consultation on a digital euro: public consultation (questionnaire)”, October.[8]ECB Crypto Assets Task Force (2019), “Crypto-Assets: Implications for financial stability, monetary policy, and payments and market infrastructures”, Occasional Paper Series, No 223, ECB, May.[9]ECB Crypto Assets Task Force (2020), “Stablecoins: Implications for monetary policy, financial stability, market infrastructure and payments, and banking supervision in the euro area”, Occasional Paper Series, No 247, ECB, September.[10]G7 Working Group on Stablecoins (2019), “Investigating the impact of global stablecoins”, October.[11]See footnote 9 and Panetta, F. (2020), “The two sides of the (stable)coin”, speech at Il Salone dei Pagamenti 2020, 4 November.[12]G7 Working Group on Stablecoins (2019), “Investigating the impact of global stablecoins”, October; Panetta, F. (2020), ibid.[13]Kocherlakota, N. (1998), “Money Is Memory”, Journal of Economic Theory, Vol. 81, No 2, pp. 232-251.

MAS Announces 20 Finalists for the 2020 Global FinTech Hackcelerator

The Monetary Authority of Singapore (MAS) announced today the 20 finalists for the 2020 Global FinTech Hackcelerator. The finalists this year comprise several unique solutions that seek to drive positive social and environmental impact within the financial sector, in response to the challenges posed by COVID-19 and climate change. The Global FinTech Hackcelerator identifies innovative market-ready solutions to address real industry needs. The finalists will pitch their solutions at the Global FinTech Hackcelerator Demo Day at the 2020 Singapore FinTech Festival x Singapore Week of Innovation and TeCHnology (SFF x SWITCH).

2   The finalists were selected through two parallel segments – the Local Programme, which addressed high-priority problem statements collated from the finance industry in Singapore and globally; and the International Programme, which comprised solutions from winners of FinTech competitions organised by international partners.

  • In the Local Programme, supported by KPMG Digital Village, 10 finalists were shortlisted from over 270 submissions from across more than 40 countries. These submissions addressed a record 107 problem statements across four categories: (i) Responding to a Global Pandemic; (ii) Green Finance Solutions; (iii) Green Finance Enablers; and (iv) Sustainability. More than 150 of the submissions came from Asia and about a third were from Singapore. 
  • The International Programme participants comprised 10 winners from six independent FinTech competitions organised by our international partners. This year, the Global FinTech Hackcelerator’s international partners are Abu Dhabi Global Market [1] , Accelpoint [2] , the Saudi G20 Presidency and the Bank for International Settlements Innovation Hub [3] , the Central Bank of Kenya [4] , the United Nations Capital Development Fund (UNCDF) [5] , and Women’s World Banking [6] . In total, more than 700 FinTechs spanning across the globe participated in the International Programme. 

For more details on the Local and International Programmes, refer to Annex A. For details on the finalists, judging panel and corporate mentors for the Local Programme, refer to Annexes B and C.

3   During Demo Day on 10 December, finalists will present their innovations and the top three winners will win S$50,000 in prize money each. All 20 finalists will also receive a S$20,000 cash stipend and be fast-tracked in their applications to receive grant funding under the MAS Financial Sector Technology and Innovation (FSTI) Proof-of-Concept Scheme [7] . In addition, the finalists will exhibit their solutions as part of the Digital Showcase at SFF x SWITCH. The finalists will also be invited to a dedicated Deal Friday networking session in November to meet potential investors [8] .

4   Mr Sopnendu Mohanty, Chief FinTech Officer, MAS said, “Over the past four years, the Global FinTech Hackcelerator has provided FinTechs from Singapore and around the world with an excellent platform to showcase innovative solutions that can solve key problems within the financial industry. This year, there is added urgency to address pressing challenges brought about by COVID-19 and climate change. This is evident from the record number of problem statements submitted by the industry. We look forward to seeing our finalists use the Global FinTech Hackcelerator as a launchpad towards greater success while helping the financial industry tackle the health, economic, and climate crises facing our generation.”

5   Mr Allwyn Barreto, Partner, Financial Services Advisory, KPMG in Singapore said, “COVID-19 has presented an opportunity to reflect on how an accelerated pace of life has impacted our environment and social fabric. This pause presents an opportune moment for the brightest entrepreneurial minds to define what KPMG believes will be the emergence of a new normal. As we take our partnership forward with MAS with a shift to a fully digital Global FinTech Hackcelerator programme this year, we look forward to more innovative ideas that will address our biggest challenges today. Through KPMG Digital Village, key resources and mentors will be at participants’ disposal, assisting to sharpen and scale solutions that will help the financial industry and community at large, to ensure a sustainable and resilient planet for future generations.”

About the Monetary Authority of Singapore

The Monetary Authority of Singapore (MAS) is Singapore’s central bank and integrated financial regulator. As a central bank, MAS promotes sustained, non-inflationary economic growth through the conduct of monetary policy and close macroeconomic surveillance and analysis. It manages Singapore’s exchange rate, official foreign reserves, and liquidity in the banking sector. As an integrated financial supervisor, MAS fosters a sound financial services sector through its prudential oversight of all financial institutions in Singapore – banks, insurers, capital market intermediaries, financial advisors, and stock exchanges. It is also responsible for well-functioning financial markets, sound conduct, and investor education. MAS also works with the financial industry to promote Singapore as a dynamic international financial centre. It facilitates the development of infrastructure, adoption of technology, and upgrading of skills in the financial industry.

About the Singapore FinTech Festival

Singapore FinTech Festival (SFF) is the world’s largest FinTech event and a global platform for the FinTech community comprising FinTech players, technopreneurs, policy makers, financial industry leaders, investors including private equity players and venture capitalists, and academics. In 2019, SFF and the Singapore Week of Innovation and Technology (SWITCH) saw more than 60,000 participants from almost 140 countries and featured highlights such as the FinTech Conference, the FinTech Awards, Global FinTech Hackcelerator, Innovation Lab Crawl and Industry Networking and Workshops. The SFF is organised by the Monetary Authority of Singapore (MAS) in partnership with The Association of Banks in Singapore and in collaboration with SingEx Holdings. Find out more at www.fintechfestival.sg .

About SWITCH

The Singapore Week of Innovation & TeCHnology (SWITCH) is the leading tech festival for the Global-Asia innovation ecosystem. It is a one-stop platform where innovation meets enterprise, with access to global startups, investors, corporates, innovation community and ecosystem players. It focuses on these key industries – Health & Biomedical Sciences, Smart Cities & Urban Solutions, and Trade & Connectivity.

SWITCH is a week-long event featuring Exhibitions, Conferences, Workshops, Lab Crawls, and partner activities such as startups pitching competition, SLINGSHOT 2020, and open innovation platform, TechInnovation. Together with the Singapore FinTech Festival (SFF), SFF x SWITCH convened over 60,000 participants from 140 countries, hosted 569 speakers and 1,000 exhibitors in 2019.

SWITCH is supported by the National Research Foundation Singapore (NRF).

Find out more at http://www.switchsg.org/

  1. [1] FinTech Abu Dhabi Innovation Challenge.
  1. [2] European FinTech Hackcelerator.
  1. [3] G20 TechSprint 2020.
  1. [4] Virtual Africa Hackathon.
  1. [5] COVID-19 Financial Health Challenge.
  1. [6] Making Finance Work for Women FinTech Innovation Challenge.
  1. [7] The MAS Financial Sector Technology and Innovation (FSTI) Proof of Concept (POC) scheme provides funding support for experimentation, development and dissemination of nascent innovative technologies in the financial services sector.
  1. [8] Deal Fridays are curated deal-making sessions for facilitating investment into start-ups. They are held once a month on Fridays from March to December 2020. The 20 finalists of the Global FinTech Hackcelerator will have a dedicated Deal Fridays session on 27 November 2020 for them to network and pitch to investors.

Two UK companies set up in Lithuania after Brexit granted electronic money institution licences

The Board of the Bank of Lithuania issued electronic money institution licences to FIDELIS EUROPE, UAB, and DiPocket, UAB, authorising them to issue electronic money and provide payment services set forth in the Republic of Lithuania Law on Payments. Following Brexit, the activities of two UK-based companies will be transferred to these licensed institutions.

Activities of Probitas Fidelis Limited, a payment institution licensed in the UK, will be transferred to FIDELIS EUROPE, UAB. It will open accounts for its customers, provide cash deposit and withdrawal services, execute payment transactions, including where funds are covered by a credit line for a payment service user, issue payment instruments, perform money remittances as well as provide payment processing and currency exchange services. The institution’s customers will mainly be legal entities, yet it will also provide services to natural persons. FIDELIS EUROPE, UAB intends to carry out its activities in Lithuania and other European Economic Area countries. 100% of its shares are held by TRESARIUM LIMITED – a holding company established in the UK. Activities of DiPocket Limited, an electronic money institution licensed in the UK, will be transferred to DiPocket, UAB.

The institution will follow the Business to Business to Consumer (B2B2C) model, i.e. focus on its customers – legal entities – whose clients might find its services useful. DiPocket, UAB will execute payment transactions, provide cash deposit and withdrawal services, issue payment instruments as well as provide payment initiation, account information and currency exchange services both in Lithuania and other European Economic Area countries. All of its shares are held by DiPocket Limited. Having secured the licence, the institutions are obliged to provide the Bank of Lithuania with a copy of their agreements concluded with credit institutions, confirming proper implementation of measures for safeguarding customer funds before they start providing the aforementioned financial services.

CFTC and South African Reserve Bank Announce Cooperative Effort to Promote Fintech Innovation

The Commodity Futures Trading Commission and the South African Reserve Bank (SARB) today announced they have signed a Statement of Intent to cooperate and support innovation through each authority’s respective financial technology (fintech) initiative—CFTC’s LabCFTC and SARB’s Fintech Unit.

“We welcome the opportunity for enhanced cooperation with our South African colleagues to promote responsible fintech innovation. This arrangement builds on recent efforts by the CFTC to strengthen international collaboration in this realm,” said CFTC Chairman Heath P. Tarbert, referencing the agency’s 2018 arrangements with authorities in the United Kingdom, Singapore, and Australia, and the 2019 joining of the Global Financial Innovation Network. “Coordinating with our international partners has many benefits, including helping us keep up with the rapid pace of technological changes in our markets.”

Collaboration amongst authorities is increasingly becoming a crucial component to understanding approaches to fintech innovation. Such collaborative efforts will promote ongoing joint knowledge sharing on complex fintech matters.

The Statement of Intent on Cooperation and the Exchange of Information on Financial Technology Innovation focuses on information sharing regarding fintech market trends and developments. It is also designed to facilitate referrals of fintech businesses and the sharing of information and insights derived from each authority’s experiences and relevant events, proofs of concept, trials, or innovation competitions. The arrangement will support both authorities’ efforts to facilitate market-enhancing fintech innovation and ensure international cooperation on emerging regulatory best practices.

About LabCFTC

In service to the CFTC’s goal of encouraging innovation and enhancing the regulatory experience for market participants at home and abroad, LabCFTC’s mission is to be the FACE of innovation within the Commission in promoting responsible innovation among financial industry, stakeholders, and policymakers by:

  • Facilitating dialogue between innovators and those within the CFTC on financial and technological innovations;
  • Advancing policy and regulation in financial innovation;
  • Coordinating internally and externally with International, Federal, and State regulators, organizations, and associations; and
  • Educating internal and external stakeholders on financial technology and innovation in the financial markets to identify how innovations are being used.

Visit cftc.gov/LabCFTC for more information and sign up here for important LabCFTC updates.

About SARB’s Fintech Unit

The Fintech Unit was established in 2017, to further the SARB’s efforts to embrace fintech innovation whilst ensuring appropriate alignment to policies, regulations, and supervisory regimes.