Process Note

Singapore has positioned itself as the Fintech Hub of Asia, and its rapidly developing neo
banking sector plays a crucial role in this success. With a progressive regulatory framework,
robust infrastructure, and a growing consumer appetite for digital banking services, neo
banks in Singapore are transforming the financial landscape. This write-up offers an in-depth
overview of neo banks in Singapore, their regulatory framework, operational landscape, and
emerging trends.

Singapore’s Unique Fintech Environment

Singapore's status as a fintech powerhouse is rooted in several strategic elements that create
an ideal environment for financial technology innovation:

1.​ Government Investment in Payment Infrastructure: The Singaporean government

has made significant investments in creating a modern and efficient payment
infrastructure. This includes developing secure and scalable systems for both
domestic and cross-border payments. The government’s commitment to fostering
fintech growth ensures that new financial solutions, including neo banks, have a
reliable backbone to operate on.​

2.​ Monetary Authority of Singapore (MAS) and Stringent Regulatory Standards: The
Monetary Authority of Singapore (MAS) plays a pivotal role in shaping the country’s
financial services sector. With an emphasis on ensuring financial stability and
consumer protection, MAS has set clear eligibility criteria for financial institutions,
including neo banks. Only those that meet these criteria can operate in the market,
ensuring that participants are financially sound and capable of sustaining long-term
growth. Additionally, banks are required to demonstrate a clear path toward
profitability within five years, promoting sustainability.​

3.​ Controlled Digital Banking Licenses: The MAS issues a limited number of digital
banking licenses, carefully regulating the number of players entering the market to
prevent oversaturation. The two types of licenses available are:​

○​ Digital Full Bank (DFB) License: Issued to entities that can provide a full range
of banking services to both retail and corporate customers.
○​ Digital Wholesale Bank (DWB) License: Issued to banks that provide services
primarily to small- and medium-sized enterprises (SMEs) and other corporate
clients, with limited or no retail services.

These restrictions ensure a competitive but manageable digital banking market.

Types of Neo Banks in Singapore

Neo banks in Singapore either operate as standalone digital banks or partner with
traditional banks to leverage their licenses. These banks offer a suite of services via mobile
applications, delivering a user-friendly, digital-first banking experience.

1.​ Airwallex: A global financial services company that provides cross-border payment
solutions and has expanded its services to the Singapore market.
2.​ Frank: A digital bank launched by OCBC, catering to the younger generation with
features such as zero-fee accounts and instant transfers.
3.​ Revolut: An international digital bank that offers a wide array of financial products,
including multi-currency accounts, stock trading, and cryptocurrency services, to
users in Singapore.
4.​ Aspire: A neobank targeting SMEs with features like business accounts, expense
management, and automated invoicing.
5.​ Payoneer: A global payments platform that also provides banking-like services,
including international money transfers and multi-currency accounts.
6.​ YouTrip: A mobile wallet that focuses on enabling cross-border payments for
travelers, offering low exchange rates and no transaction fees for its users.

Additionally, GXS Bank, Trust Bank, Greenlink Digital Bank, and Mari Bank are newer
entrants into the Singapore digital banking scene.

Regulatory Landscape for Neo Banks

The regulatory framework for neo banks in Singapore is set by the MAS, which has laid out a
comprehensive and structured approach to digital banking. The regulatory policies ensure
that only well-capitalized and properly managed digital banks operate within the country.

1.​ Eligibility Criteria for Digital Bank Licenses:​

○​ DFBs are allowed to offer full banking services to both retail and corporate
customers. However, for the first 1-2 years, DFBs with restricted licenses are
limited to taking deposits only from shareholders, employees, or related
entities. After this period, they can take deposits from the public.
○​ DWBs are permitted to provide banking services to SMEs and corporate
clients but may not serve individual retail customers unless specifically
authorized by MAS. This restriction ensures that the market is not flooded with
banks targeting the same segment.
2.​ Licensing and Expansion:​

○​ DFBs: Once they transition to unrestricted status, DFBs can expand their
services to a broader customer base. However, the approval process and
timeline are tightly controlled by the MAS.
 ○​ DWBs: While their focus is on corporate clients, DWBs may be permitted to
provide certain retail services if these services directly benefit their core
business operations, such as providing financial advice to corporate
customers.
3.​ Anti-Money Laundering (AML) and Countering Terrorism Financing (CFT):​

○​ Neo banks are required to comply with MAS's AML/CFT regulations. They
must implement systems for risk assessment and mitigation, conduct
customer due diligence (CDD), and keep extensive records of financial
transactions.
○​ They are also responsible for ensuring that they monitor customer
transactions for suspicious activities and maintain vigilance against fraud.
4.​ Technology Risk Management:​

○​ Neo banks are subject to the MAS Technology Risk Management Guidelines,
which require them to ensure their IT infrastructure is secure, resilient, and
capable of withstanding cyberattacks.
○​ The guidelines also emphasize the importance of data protection, incident
reporting, and system recovery measures in case of critical failures.
5.​ Consumer Protection:​

○​ Neo banks must comply with the Personal Data Protection Act (PDPA), which
governs how personal data is collected, processed, and stored. They must
implement robust security measures to protect users' sensitive information.
○​ Neo banks are also required to be transparent about fees, services, and terms,
ensuring consumers are adequately informed.

Operational Landscape of Neo Banks in Singapore

Neo banks in Singapore primarily operate through mobile applications, offering a digital
banking experience tailored to the needs of their tech-savvy customers. This model allows
neo banks to provide more streamlined, lower-cost services compared to traditional banks.

●​ Account Opening and KYC: Neo banks use digital onboarding to streamline the
account creation process. This typically involves:​

○​ User Identification: Collecting personal details, such as name, address, and

government-issued ID numbers.
○​ Document Verification: Customers must upload identification documents for
verification.
○​ Biometric Authentication: Many neo banks incorporate biometric verification
methods, such as facial recognition or fingerprint scanning, to enhance
security.
 ●​ Transaction Limits: While neo banks offer competitive and flexible banking solutions,
they often impose transaction volume limits. For instance, virtual bank accounts may
have daily or monthly transaction caps, which vary depending on the institution.​

●​ User Experience: Neo banks focus heavily on delivering a seamless digital experience.
Features include real-time notifications, easy account management, budgeting tools,
and integrated financial services, such as savings accounts, transfers, and investment
options.​

Challenges and Opportunities for Neo Banks in Singapore

While the growth of neo banks in Singapore offers exciting opportunities, several challenges
persist:

1.​ Regulatory Compliance: The stringent regulations set by the MAS can be a barrier
for new entrants, particularly those seeking to obtain a full banking license. Neo banks
must ensure that they meet all regulatory requirements, including those related to
AML, data protection, and technology risk management.​

2.​ Market Competition: The market for digital banking services in Singapore is growing,
but it is also becoming increasingly competitive, with traditional banks stepping up
their digital offerings. Neo banks must differentiate themselves by providing superior
user experiences, innovative services, and competitive pricing.​

3.​ Consumer Trust: As digital-first institutions, neo banks need to build consumer trust.
This requires delivering reliable services, ensuring data security, and maintaining
transparency regarding fees and terms.​

4.​ Financial Stability: Many neo banks rely on technology and digital platforms, making
them more vulnerable to cyberattacks or system failures. Building robust IT systems,
ensuring data resilience, and adopting strong cybersecurity measures are essential
for maintaining stability.​

The Future of Neo Banks in Singapore

The future of neo banks in Singapore is promising. With the APAC neo bank market
expected to grow from USD 1.68 billion in 2024 to USD 2.58 billion by 2029, Singapore is set to
remain at the forefront of fintech innovation in the region.

Neo banks will continue to benefit from supportive government policies, a dynamic regulatory
environment, and increasing consumer demand for digital-first financial services. As the
market matures, neo banks will likely expand their offerings to include more comprehensive
financial products, enhance personalization, and develop new ways to serve niche customer
segments.

In conclusion, Singapore’s neo banking sector presents both opportunities and challenges, but
with the right strategy, innovation, and regulatory compliance, digital banks in Singapore are
well-positioned to become a dominant force in the financial services landscape of the future.