MAS’s (Monetary Authority of Singapore) announcement to extend the Digital Banking Assessment Period to 2H 2020 has dampened the earlier excitement generated from rumours of different consortiums coming together. Fourteen out of the 21 applicants have been shortlisted and will be presenting their proposal via virtual meetings, with appointments of senior shakers like Citi’s Charles Wong (to Grab-Singtel) and UOB-TMRW’s Dennis Khoo (to a consortium backed by Bytedance) being confirmed.
Interestingly, COVID-19 has put Digital Banks back at the forefront. The pandemic has changed consumers’ digital behaviour and forced customers, who once resisted online banking, to adopt digital banking apps as their new default. These behavioural changes have accelerated Singapore’s push for digital-first banking while prioritising a strategy to derisk and encourage innovation. This firmly shines a spotlight on the importance of Corporate Governance in Digital Banks, from their inception.
Digital Banks need to get the governance framework right from the start. A strong governance team will build the right foundation for establishing a Digital Bank that ensures key regulatory obligations and risk management frameworks are fully understood and robust set-ups are in place.
Risk management, Cybersecurity and Compliance will be a major focus, levelling the playing field between potential Digital Banks and the incumbents.
An understanding of the plethora of risks these banks will be exposed to is essential, and a robust risk framework needs to be established. Analytics in risk management will be essential in the data-driven environment, and inevitably cybersecurity will be a critical risk area in Digital Banks because of the rise in the rate of cybercrimes in the banking sector.
Risk management has evolved over the years and many are leveraging the latest technology to protect their data and customer base while reducing friction. Digital Banks must adopt zero-trust infrastructure and ensure multi-level security procedures are in place. Managing risk on the second line across infosec and cybersecurity will have even greater importance.
From a compliance perspective, finding the balance between regulations and technological innovations will be vital in sustaining growth in the industry. The key regulatory pillars and obligations in establishing a Digital Bank would be no different from that of a traditional bank. Functions like ethics, conduct, product compliance, AML, transaction monitoring and fraud risk/operations management are the essentials
Digital Banks need to adapt to the evolving landscape and adopt modern electronic Know Your Customer (eKYC), anti-money laundering (AML) and identity verification technologies. The adoption of such solutions will not only allow them to respond to the new risks arising from digital solutions, such as online identity fraud and account takeovers but will also allow them to meet customers’ demands for a seamless onboarding experience. Additionally, the need to adopt smart and efficient eKYC solutions is even more critical for Digital Banks which operate solely digitally.
As we head towards the second half of the year, we will see more announcements of applications for the digital bank license. Further shortlisting, post the proposal presentation, will focus on their value proposition and business model, in particular, post-COVID-19 impacting the macroeconomics and business conditions.
Zul focuses on hiring across the FS Governance vertical, in particular for Risk, Compliance and Cybersecurity. Typical mandates include Heads of, CISO and Cybersecurity, AML, Risk Analytics and all other Governance related roles.