Opening a Digital Bank Account for your Singapore Company

This article is a guide to the digital banking options that are available for companies operating in Singapore. It describes the digital banking services offered to corporate accounts. The pros and cons of opening digital accounts for your business (instead of opening a traditional bank account) are also discussed. Regulatory issues that are unique to digital financial institutions are described. Finally, the anticipated enhancements for digital banking that are planned in the near future are outlined.

Introduction

Singapore is well-recognized for having one of the most sophisticated banking sectors in the world. It ranked fifth in the 27th edition of the Global Financial Centres Index (GFCI) released in March 2020. Singapore has also been a hotbed of innovation in this sector and has emerged as a world-leading fintech center, ranking fifth on the FinTech Index in the GFCI 27 report. The latest wave of innovation involves “digital banks”; the term is used to describe banks that operate exclusively online, in other words these banks have no physical office locations. The Singapore government views this as an efficiency and productivity-enhancing innovation and it has supported fintech companies that offer such services. It has adopted legislation that authorized several non-banking financial institutions to offer digital business accounts for Singapore-based entities. Recently, the Monetary Authority of Singapore has launched a new initiative whereby it will grant banking licenses to full-featured digital banks. So if you are starting a Singapore business, and transact mostly online, the quick-to-open and easy-to-use corporate digital account may be an ideal choice for your company.

What is “Digital banking”?

Digital banking is the online (or “digital”) delivery of new and traditional banking products and services directly to customers. The term also covers online financial services provided by non-bank financial institutions (those that have not obtained a banking license). For the most part, online banking, internet banking, and digital banking are synonymous terms.

Digital banking offers convenience and cost efficiencies to both the bank and its customers. While customers save time and hassle through convenient banking transactions that can be conducted on-the-go from anywhere at any time, banks save money on physical infrastructure and hiring costs by moving a part of their business online. While in-branch banking will continue to be a part of the banking industry, the benefits of digital banking cannot be ignored.

Digital accounts versus traditional banking

Digital banking offers numerous advantages over traditional banking:

  • A Bank in your pocket. With digital banking, everything is managed on your smartphone or laptop. Certain institutions still require that you visit a branch to initially open an account, but most permit even this to be done online. Note that with certain digital banks, you can only use an app on your smartphone and won’t get access to Internet banking through your computer.

  • Quick Account Opening. Most digital banks offer much faster opening procedures compared to traditional banks for Singapore-incorporated companies (usually two hours or less).

  • Low initial deposit. Internet banks ordinarily do not require high initial deposit in your account to get started.

  • Lower fees and higher interest rates. Digital banks incur lower operating costs for maintaining bank branches and ATMs, which may translate to higher interest rates and lower fees for customers.

  • Fast and cheap international transfers. Traditional banks usually require a waiting period for their financial monitoring department to check international transactions, while digital banks in most cases do this automatically and consequently much faster. Fees for transfers are also usually lower.

  • 24/7 support. Internet banks offer services 24/7, compared to traditional banks that may operate only during branch working hours.

  • Managing multiple currencies is easier. Digital banks tend to offer better services for handling foreign currency. Some let you hold multiple currencies in your account, while others let you make international currency exchanges and transfers faster and more cheaply than traditional banks.

However, some features offered by traditional banks may not be made available by digital banks:

  • Cash and cheques usually aren’t supported. The Monetary Authority of Singapore (MAS) has stipulated that digital banks in Singapore are not allowed to access the Automated Teller Machines (ATMs) or cash deposit machine network. This means you will have to transfer funds to your digital bank’s account balance through a credit card, debit card or bank transfer.

  • Lower limits. Digital non-bank institutions impose lower transaction thresholds and other limits compared to traditional banks.

  • Your money may not be protected the same way it is with traditional banks. Not every mobile bank has a full banking licence. Consequently, your deposits may not be insured by a government guarantee. In Singapore, MAS recently announced that the government would issue digital bank licences to non-banking enterprises. For example, digital bank Revolut has been granted a Major Payment Institution licence by MAS, even though it is a non-banking enterprise. This means that Revolut may conduct its mobile banking business in Singapore, but your money may not be covered by a government guarantee. Nevertheless, other safeguards are in place; these banks are required to keep customer deposits in an account with a separate bank, which the customer can then claim back if something goes wrong.

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Singapore regulatory regime for digital banking

Payment Institutions

As of the publishing date of this article, all of the Singapore companies that provide digital banking services only are non-banking financial institutions. Officially they are treated as “payment institutions” and are regulated by the Payment Services Act, which came into effect on January 28, 2020. The Act unified and streamlined the regulatory requirements for seven payment services provided in Singapore; these are account issuance, domestic money transfer, cross‑border money transfer, merchant acquisition services, e-money issuance, digital payment token services, and money‑changing.

Under an “account issuance service,” the financial institutions are allowed to issue payment accounts to Singapore-resident persons (including companies) and provide any services related to operating a payment account, including “those enabling money to be placed in or withdrawn from a payment account.”

Internet banking companies usually operate under the Standard Payment Institution License or the Major Payment Institution License; the latter being the more reputable of the two. Major Payment Institutions can provide any combination of the seven regulated payment services. They are subject to more comprehensive regulation than Standard Payment Institutions, as the scale of their operations poses greater risks. For example, a major payment institution must comply with requirements designed to protect customer money.

Digital banks

Digital banks represent an in-progress project — still awaiting an official launch — of the Singapore Government. In June 2019, MAS announced that in 2020 it would issue several Digital Full Bank (DFB) licences and digital wholesale bank (DWB) licences. Digital full banks will be allowed to take deposits from retail customers, while digital wholesale banks will generally cater to small and medium-sized enterprises and other types of non-retail segments. These new digital banks will operate in addition to all entities that already operate under the MAS’s existing internet banking framework (traditional banks with online services and payment institutions).

Digital-only banks will be permitted to operate at lower reserves and face fewer regulatory requirements than traditional banks and will offer services similar to those of traditional banks, such as corporate and individual accounts, deposits, loans, debit and credit cards, etc., except that transactions are performed online and the bank does not have a physical branch.

In January 2020, MAS announced that it had received 21 applications for digital bank licences, comprising 7 applications for digital full bank licences and 14 applications for digital wholesale bank licences. In June 2020, 14 of the 21 companies that applied were shortlisted. The authority has not yet announced the shortlisted candidates but confirmed that it would inform successful applicants during the second half of 2020. From other sources, it is known that at at least the following 8 candidates are currently on the short list, and some of them will probably obtain the final licenses:

Shortlisted applicants or consortiums

Type of Digital Bank License

Singtel and Grab

Digital Full Bank License

Sea Limited

Digital Full Bank License

Razer, Sheng Siong Holdings, FWD, LinkSure Global, Insignia Venture Partners and Carro

Digital Full Bank License

V3 Group, EZ-Link, Far East Organisation, Singapore Business Federation, Sumitomo Insurance Co Ltd and Heliconia Capital Management

Digital Full Bank License

MatchMove's consortium with Singapura Finance

Digital Full Bank License

iFast Corporation, Hande and Yillion

Digital Wholesale Bank License

ShengYe Capital, Phillip Capital and Advance AI

Digital Wholesale Bank License

AMTD, Xiaomi, SP Group and Funding Societies

Digital Wholesale Bank License

Currently available digital banking options in Singapore

As already mentioned, most digital banking institutions in Singapore now operate in the form of payment institutions. They are eligible to provide account issuance services, domestic and cross‑border money transfer, e-money issuance, digital payment token services, etc.

A number of such firms are available in Singapore. The most reliable and well-known firms offering business account services are the following:

  • Revolut. Revolut is a global banking app that offers multi-currency accounts allowing clients to hold, exchange, send and receive funds in 28+ currencies, always at the real (interbank) exchange rate, free international and local payments within the client’s plan allowance, and free transfers between Revolut Business accounts.
  • TransferWise. Along with a free debit Mastercard, TransferWise’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.
  • Aspire. The company offers digital business accounts for SMEs and startups. In addition, it offers an easy and attractive credit line and payments product focused on small businesses.
  • InstaReM. This app offers corporate accounts with quick and easy payments to business partners in over 60 countries and comparatively higher transaction limits.

        Should you open a digital corporate account?

        If you are just starting up and operating with relatively low amounts of working capital, have reviewed the pros and cons of digital banking and still wish to have a fast and efficient solution for your business account, digital banking may be a good choice.

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

        Who can apply?

        All entities registered in Singapore with ACRA are eligible to apply. The applicant must be the director of the business. The director does not need to be a Singapore citizen, so foreigners are eligible to apply as long as their entity is registered in Singapore with ACRA.

        What documents do I need to submit?

        ACRA Business Registration number and director’s identity document (NRIC, Passport or Work Pass) are usually required.

        How long will it take for my account to be approved?

        In most cases, you can apply online in 5–10 minutes. Accounts are usually approved within a few working hours from the submission of all required documents. You will then be able to use your account and card to transact immediately.

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        Summary

        Singapore has one of the most well-developed banking sectors in the world; it is also at the forefront of banking sector innovation. Singapore has nurtured the digitization of banks. Simply put, digital banks offer the same types of banking services as traditional banks but operate entirely online without physical infrastructure such as, bank branches. So customers of a digital bank can control their finances entirely from their smartphones and computers. Digital banking offers numerous advantages for companies, such as opening your business account in a few hours, low initial capital requirements, low fees, higher interest rates, fast and cheap international transfers, 24/7 support, and many others.

        If you plan to start or currently operate a business in Singapore, have low working capital needs, and transact mostly online, the digital corporate account may be a good option. CorporateServices.com can help you with incorporation of your Singapore venture and assist with opening a corporate bank account in a traditional Singapore bank as well as in a digital banking institution.

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