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Singapore opens banking market, more ATMs follow

As part of Singapore's efforts to encourage competition among banks and enhance the quality of financial services, three foreign financial institutions are launching a new shared ATM network.

April 16, 2002

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Liberalization of Singapore's commercial banking sector is yielding immediate results, with three foreign banks commencing the deployment of shared ATM services.

In December, the country's financial regulatory body, the Monetary Authority of Singapore (MAS), issued two qualifying full bank (QFB) licenses that will give foreign banks greater access to the local retail and wholesale banking markets.

Malaysia's Malayan Banking Bhd (Maybank) and Hongkong and Shanghai Banking Corporation (HSBC) became the latest banks awarded the status. Citibank, ABN Amro, Standard Chartered (StanChart) and Banque Nationale de Paris (BNP Paribas) received the privileges in 1999.

Share and share alike

Two days after the announcement of their new status, Maybank and HSBC joined with StanChart to announce their intention to offer the country's first QFB shared ATM network.

The shared network, based on the MasterCard ATM platform, launched late last month. Balance inquiry and cash withdrawal services will be offered at first, with services broadened over time in line with customer needs, according to bank representatives.

From July 2002, QFBs will also be allowed to provide debit services on an EFT/POS network. QFBs can negotiate with an existing EFT/POS network such as NETS, Visa or MasterCard for access on "fair commercial terms," according to MAS rules. QFBs will then be able to issue debit cards.

Although QFB banks were awarded the privilege of establishing a shared ATM network in Singapore's first phase of liberalization in 1999, the service required the momentum of Maybank Singapore, which operates 24 ATMs, the island's largest foreign bank fleet.

According to a Maybank Singapore representative, the shared network will give customers of HSBC, Maybank and Standard Chartered Bank access to a combined network of up to 54 ATM locations islandwide. With the five off-premise ATMs per bank allowed under QFB rules, the total number of ATMs would increase to 69.

The QFB shared ATM service will compete with a similar local bank network, the Network for Electronic Transfers (NETS), which was founded in 1985 to operate and manage an online debit payment service. The company introduced shared ATM services in November 1988 to facilitate switching facilities among shareholder banks.

Two local banks, OCBC Bank and United Overseas Bank (UOB) - with a total of 536 ATMs - participate in NETS. The participants were reduced by half as a result of mergers, which have been actively encouraged by MAS to strengthen the banking sector. Keppel TatLee Bank merged with OCBC Bank and Overseas Union Bank merged with United Overseas Bank (UOB).

Bring it on

Faced with a new network, local banks don't seem unduly concerned.

A UOB spokesperson said the bank "welcomes the competition." UOB has 413 ATMs islandwide, including 136 gained through its merger with OUB. UOB customers can also access OCBC ATMs, as both banks are members of NETS.

"Now that Keppel TatLee Bank has integrated its operations with OCBC Bank, our personal banking and business customers can enjoy greater access to 470 self-service terminals which are strategically located throughout Singapore," said an OCBC spokesperson. "In line with our commitment to provide customers with banking convenience, we will constantly review possible and potential locations to further extend our ATM network."

Maybank considers its new QFB status to be a boon for consumers.

"The QFB privileges will allow us to expedite our strategy and plans to better serve the needs of our customers. We will continue to improve the effectiveness of our network and enhance our reach to maximize the impact to the customer base that we are targeting," said a Maybank spokesperson. "Hence, our immediate priority will be to maximize our footprint and penetration to deliver our products and services in Singapore."

Competition is good

According to Jacqueline Ong, assistant director of corporate communications for MAS, the banking liberalization program is deliberately phased out to give the local banks time to upgrade themselves to meet the competition and to maintain the stability of the financial system.

The banking liberalization regulations, with their provisions for creating a shared ATM network and gaining access to an EFT/POS network, substantially enhances QFBs' access to the retail banking market, she said.

Ong said this second phase of liberalization sought to simplify Singapore's three-tiered banking system, making it a more streamlined two-tier licensing regime of QFBs -- which also serve the retail market -- and wholesale banks. Previously, commercial banks were awarded full, restricted and offshore licenses.

Ong said that all qualifying offshore banks (QOB) have been upgraded to the wholesale bank status as a result of the changes. MAS will progressively upgrade all offshore banks to wholesale banking status over time.

"Full banks may conduct the complete range of banking activities, including both wholesale and retail activities. Wholesale banks have restricted access to the domestic retail market, but are permitted to conduct all other banking activities," she explained.

In last year's speech to the Association of Banks, Deputy Prime Minister Lee Hsien Loong, the chairman of MAS, expressed his desire for fewer banks with larger scale. "If the local banks fail to achieve enough scale, they will not be able to invest in cutting-edge technology and management systems, or to attract the talent necessary to compete with the best players," he said in his address.

He said that competition from foreign banks would increase services for consumers, ultimately allowing banks to diversify their earnings by providing new banking services. Also, Singapore is keen to strengthen its position as an international financial center, he said.