As the digital banking industry takes shape, new entrants are expected to challenge established players for market share but Singapore's «Big 3» banks will likely continue their dominance, according to a Fitch report.
Despite the entry of up to five new digital banks into Singapore's retail banking landscape, the dominance of the country's three biggest lenders – DBS Bank, United Overseas Bank, and OCBC Bank – is unlikely to be threatened, Fitch Ratings said.
«Banking sector competition will increase but is unlikely to erode significantly these banks' business volumes or profitability because of their strong franchises and growing digital capabilities and the regulator's commitment to prevent value-destructive competition,» the credit ratings agency said in a statement on Monday.
Last Friday, MAS announced rules for the licenses and said it would accept applications until the end of the year. It expects to announce the successful license recipients in mid-2020 and allow operations to launch by mid-2021.
New Era of Competition
Fitch said it expects increased competition in lending, especially to more digitally savvy retail and SME customers, and for the digital banks to increase pricing competition for deposits. However, it noted that new entrants will need time to build trust build up core deposits.
It noted that new licenses are likely to create new partnership opportunities among banks, non-bank financial institutions and fintechs, adding that it «sees minimal downside to incumbent banks' profitability as these tie-ups would be likely to lead to more measured competition.»
In June, the Monetary Authority of Singapore (MAS) said it would issue up to five digital banking licenses – two digital full bank licenses and three digital wholesale bank licenses – this year, which analysts say would herald a new era of competition for the industry.
In addition to the dominant local players, smaller regional businesses like Maybank and ICBC have also been ramping up their digital efforts in a bid to remain competitive.
