"The line between financial and non-financial business is blurring. Banks are facing increasing competition from online and non-financial players that have leveraged their large user base to provide digital wallets, payments and remittance services," Heng said.
"To maintain our competitive edge, we must ready ourselves for the next wave of change," he said.
In this year's budget, Singapore unveiled projects to invest in infrastructure, deepen the workforce's technology skills and digitalise the economy.
This came after a Singapore advisory panel proposed a 10-year strategy aimed at ensuring annual economic growth of 2-3%.
The Monetary Authority of Singapore said in a statement that it will allow banks to engage in the operation of digital platforms that match buyers and sellers of consumer goods or services as well as the online sale of such goods or services.
Banks are currently prohibited from selling consumer goods.
“The logic is compelling. With the ubiquity of the smartphone, customers increasingly want banking to be seamlessly integrated into their daily lives,” said DBS CEO Piyush Gupta.
“There are a number of areas where a banking service can be nicely integrated into e-commerce, and we welcome the opportunity to do so," he said.
The central bank said banks need not seek prior regulatory approval before conducting or acquiring major equity stakes in permissible non-financial businesses.
To limit their exposure and ensure that banks continue to focus on their core businesses, MAS will cap such permissible non-financial operations to 10 percent of the banks' capital.
MAS will issue a consultation paper detailing the policy changes by the end of September.
