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KYC for Neobanks in the APAC Region

Learn about neobanks in the Asia-Pacific region, why they’re surging and related KYC requirements.

Neobanks surpassed 1 billion clients worldwide as of October 2023, growing by 30% in 18 months. Industry revenues jumped by over 40% in the same period. The Asia-Pacific (APAC) region has been a key driver of this growth, and is widely considered a hotspot for neobanks.

However, the proliferation of neobanks in APAC is accompanied by several challenges. This includes a lack of trust among the local population and issues related to customer verification. For neobanks to succeed in APAC, they need to earn the trust of both users and regulators. A reliable KYC solution can help them achieve these goals while combating fraud. Learn more below.

What is neobanking?

Neobanking, or digital banking, refers to a new and innovative form of banking that operates exclusively online without physical branch locations.

Neobanks (aka “digital banks” or “challenger” banks) offer a range of services, including savings accounts, payment processing, loans, and other financial products. Unlike traditional banks, neobanks only rely on mobile apps and online platforms to interact with customers.

Some neobanks may not have banking licenses, instead partnering with traditional banks to offer their services, and operate as technology-driven intermediaries relying on established banking infrastructure.

The key characteristics of neobanks include:

Digital-only approach. Neobanks prioritize digital channels (mobile apps or web platforms) for customer interactions. They don’t have physical branches.
Innovation and automation. Neobanks typically offer innovative features and services, such as real-time transaction notifications and integration with third-party financial apps. They may also involve artificial intelligence and machine learning to enhance the customer experience and personalize financial services.
Partnerships with other fintechs. Neobanks often form partnerships with other fintech companies to expand their range of services.
Better UX. Neobanks take a customer-centric approach, aiming to provide a more convenient, transparent, and responsive user experience.

Neobanks in Thailand and Singapore

Thailand’s Central Bank approved three virtual bank licenses in 2023, saying “the number is suitable to ensure stability of the local financial market and protect depositors from risk associated with new businesses”. The licensing regulations have already been completed, and the Finance Ministry is expected to vet the rules before approval. The license applications will be open in 2024, and business operations are expected to begin in 2025.

In Singapore, the banking scene is mostly influenced by three major local banks—DBS Group Holdings, Oversea-Chinese Banking Corporation (OCBC), and United Overseas Bank (UOB)—which jointly command a significant 65% share of all Singapore-dollar deposits.

In 2020, the Monetary Authority of Singapore granted digital full bank licenses to GXS Bank and Sea Limited’s Mari Bank. Additionally, established foreign bank privileges were extended to Trust Bank. This move aimed to create competition for traditional banks, fostering innovation and digital banking.

Later on, the MAS imposed a S$50m cap on retail deposit bases for Digital Full Bank (DFB) licenses during their first two years of operation. During the progression period, the DFB’s aggregate cap is expected to gradually increase. Deposit caps serve as a safeguard, creating a controlled environment for testing processes and customer engagement. However, if the goal is to support the digital banking industry, these caps are expected to evolve in tandem with the growth of the neobanking sector.

In 2020, the Monetary Authority of Singapore granted digital full banking licenses to GXS Bank and Sea Limited’s Mari Bank. Additionally, the privileges of existing foreign banks were extended to trust banks. The move was aimed at creating competition for 토토사이트 existing banks and fostering innovation and digital banking.

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