Singapore's new restrictions on large electronic wallet operators are credit positive for the city's deposit-taking banks, including its three largest by assets, DBS Bank Ltd., Oversea-Chinese Banking Corp. Ltd. and United Overseas Bank Ltd., Moody's said Oct. 15.
The Monetary Authority of Singapore's managing director, Ravi Menon, recently said that large e-wallet operators will be required to ring-fence their wallet funds and are prohibited from using those funds to make loans under the new Payment Services Bill, which comes into effect in 2019.
In addition, entities operating under a payment service provider license will have to hold a banking license before using deposits to make loans.
The rating agency said these restrictions will protect incumbent banks' lending margins and support revenue streams amid growing competition from fintech players. It added that the regulation and oversight of e-wallet operators will keep their business growth and associated risks in check, benefiting financial sector stability.
The controls imposed on e-wallet operators will help Singapore avoid the aggressive lending practices that new fintech players could adopt as a result of lighter regulation compared to banks, Moody's said. It added that the restrictions will also maintain the high regulatory standards expected of deposit-taking and lending institutions. Taken together, the requirements will limit the systemic effect of defaults by online lenders.
DBS Bank is a unit of DBS Group Holdings Ltd.