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POLICY FRAMEWORK ON THE REGULATION, LICENSING AND SUPERVISION OF DIGITAL BANKS
CHAPTER 4: LICENSING
LICENSING FRAMEWORK – KEY ISSUES > Financial inclusion goals > Physical presence > Promoters experience in internet/IT/e-commerce
As discussed in the previous chapter, a DB-specific regulatory approach usually involves the development of a unique licensing regime for DBs. This chapter will explore key elements, showing a clear divergence from standard licensing requirements and processes, to cater to the specific characteristics of DBs and related policy goals. As previously mentioned, all regulators that have developed a DB licensing regime mention financial inclusion as one, if not the main, justification for creating a new type of license. There are, nevertheless, different approaches on how the authorities see the commitments of DBs in this field. Some, such as Singapore, set explicit measures such as no-fee accounts, whereas others set general expectations. None set explicit quantitative targets.
> T echnical experience and the qualification of leadership and key management personnel > B usiness plan with risk assessment and risk mitigation mechanisms – specifically ICT and operational risk > Capital requirements > Range permissible services during the initial phase > Phasing out of regulatory divergence
4.1 PHYSICAL PRESENCE The main characteristic of a DB is the lack of a branch network, enabling DBs to minimize operational costs and providing competitive products and services for consumers. However, the regulation must recognize that the sole use of virtual channels may have some adverse impacts on consumers, especially the vulnerable.
TABLE 6: JURISDICTIONS WITH DIGITAL BANK SPECIFIC LICENSING FRAMEWORK FINANCIAL INCLUSION EXPECTATIONS JURISDICTION
INCLUSION GOALS
PRICING
DIGITAL FINANCIAL EDUCATION
HONG KONG
DBs should play an active role in promoting financial inclusion.
No minimum account balance requirement.
DBs should engage primarily in retail businesses.
No low-balance fees.
Customers must be made aware of their responsibilities to maintain security in the use of virtual banking services.
Applicants must provide a clear proposal on how it can cater to unmet financial needs or underserved segments of the market through an innovative and sustainable digital banking business model.
Not mandatory.
None.
DBs expected to potentially offer no minimum deposit accounts or low-balance fees.
However, DB’s primary value proposition should not be providing unsecured lending to vulnerable borrowers.
DBs expected to primarily cater the underserved and unserved.
Not explicit.
Not explicit.
Products should be designed to improve the overall financial well-being of the consumer.
Financial products should foster responsible usage.
SINGAPORE
MALAYSIA
The commitment of DBs to expand access to these segments will be part of a performance indicator.
TAIWAN
DBs expected to drive market innovation, thereby enhance financial inclusion.
None
None
THE PHILIPPINES
Not explicit
Not explicit
Not explicit
SOUTH KOREA
Not explicit
Not explicit
Not explicit
