Singapore’s Four New Digital Bank Licences Embrace Chinese and Homegrown Potential

Euromoney, December 4 2020

The Monetary Authority of Singapore (MAS) has announced the successful applicants for its coveted digital bank licences.

Two digital full bank licences have gone to Sea and a consortium of Grab and Singapore Telecommunications (Singtel).

Two digital wholesale licences went to Ant Group and a consortium of Greenland Financial Holding Group, Linklogis Hong Kong and Beijing Co-operative Equity investment Fund Management.

Here are some immediate thoughts on the new licensees.

1. Grab/Singtel is no surprise at all. Any conversation in Singapore about the likely winners – and there have been many of late, in the absence of much else to talk about bar Covid – has typically started with this consortium before moving on to whom the others might be.

It combines Grab, the leading southeast Asian fintech – along with Gojek, with which it is rumoured to be considering a merger – with Singtel, the Singaporean incumbent telco, in a 60:40 mix.

Grab is already a leading player in financial services in Singapore, offering not just digital wallets but lending and insurance; Singtel’s customer base in Singapore is unrivalled. Both institutions are thoroughly entrenched in the everyday lives of Singaporeans.

Indeed, Grab has been acting in expectation of a licence for some time. It hired Charles Wong, Citi’s head of retail banking, in April, as senior managing director for Grab Financial Group. Grab openly said then that he would spearhead the digibank effort if they got the licence. They would never dare say it, but they were clearly expecting it.

“If we’re successful, we’ll be able to serve retail customers and SMEs,” Reuben Lai, senior managing director of Grab Financial Group, told Euromoney in September. “We aim to give retail better ways to save and grow wealth, and allow SMEs to simplify and grow their business. The difference the bank offers us is a more fulsome set of licences and products.”

Yuen Kuan Moon, Singtel’s group CEO-designate, says: “With Singtel and Grab’s combined digital expertise and deep customer knowledge, we have the assets and the synergies to make banking more accessible and intuitive, to deliver much-needed product simplicity, speed and affordability to consumers and enterprises.”

2. Sea was also a front-runner and represents one of two horses Tencent was backing in the race. There was always a question of whether Ant or Tencent would be favoured; in the end both have been, Ant directly with a wholesale licence, and Tencent – as a main shareholder in Sea – the winner of a full bank licence.

Tencent was also represented in the fight through Tencent Cloud, which was part of an unsuccessful consortium with Asia Digital Bank Corporation (ADBC).

Sea owns the e-commerce platform Shopee – which in Singapore does battle with Alibaba-owned Lazada – and gaming business Garena.

Sea, like Grab and Gojek, is often referred to as potentially the Tencent or Alibaba of southeast Asia, although, unlike the Chinese companies but much like Grab and Gojek’s financial services arms, it is still not profitable.

3. Ant’s success with a wholesale licence is also no surprise. Here’s how Ant usually works outside its home market: it finds a local partner with a great deal of local traction and a loyal customer base, with all the right licences; it buys a minority stake, then it puts its own tech and big data efficiencies in the back-end and watches the money roll in through its stake in the business.

The Singapore licence allows it to do things rather differently, because now it will have a licence in its own name – not its usual way of doing things, but then again majority foreign ownership of domestic digital bank licences is not all that common in Asia.

The wholesale licence is designed to support financing for SMEs, so Ant won’t serve retail through it – and, indeed, it never applied for a full bank licence – but it can bring other skills it has mastered in China. Also, since parent Alibaba owns local e-commerce champion Lazada, one imagines there are potential synergies there.

The licence is a rare bit of welcome news after the suspension of Ant’s record-breaking IPO in November.

4. The surprise name is the consortium led by China’s Greenland real estate group, alongside the Hong Kong-based supply chain financing firm Linklogis.

One part of the consortium is the Chinese financing platform MinIPO and this is thought to have been crucial: the pitch was to use the lessons learned from developing financial technology in China to serve SMEs in Singapore.

This means that both the wholesale licences have gone to Chinese names and one of the full licences has gone to an institution backed by another leading player from China.

5. It is striking that there are only four licences; the MAS had said it would allow five.

Among the many disappointed bidders are notable Chinese names ByteDance, Xiaomi and the Tencent Cloud/ADBC tie-up, as well as the eclectic cast of characters who came together alongside the gaming group Razer.

The Beyond consortium, led by V3 Group alongside the EZ-Link public transport smart card, was also unsuccessful. This consortium involved, at a reasonably modest level, a subsidiary of sovereign wealth fund Temasek called Heliconia Capital Management. Homegrown fintech Arival also failed to win a wholesale licence.

The MAS said on Friday there were 14 eligible applications; there were, initially, 21 bidders. It stated that the successful applicants must meet all relevant prudential requirements and licensing pre-conditions before they are given their licences; it expects them to commence operations from early 2022.

MAS spelled out again its criteria: the value proposition of the business model, incorporating innovative use of technology to serve customer needs and reach under-served segments; their ability to manage a prudent and sustainable digital banking business; and their growth prospects and “other contributions to Singapore’s financial centre”.

The authority said the two winning full-bank applicants were “clearly stronger than the other eligible DFB applicants”. The wholesale banks, the regulator suggested, are introduced as a pilot and they will consider whether to grant more licences in the future.

“MAS applied a rigorous, merit-based process to select a strong slate of digital banks,” said MAS managing director Ravi Menon on Friday. “We expect them to thrive alongside the incumbent banks and rise the industry’s bar in delivering quality financial services, particularly for currently underserved businesses and individuals.

“They will further strengthen Singapore’s financial sector for the digital economy of the future.”

6. It was striking how quick the incumbents were to respond. Statements were released from DBS and UOB before we had heard from a single one of the winners.

UOB CEO Wee Ee Cheong was first, congratulating the winners on their arrival in “Singapore’s progressive and vibrant banking industry. Their presence will add to the healthy competition, especially in the area of digital innovations, for the benefit of Singapore’s consumers and businesses.”

Eleven minutes later, Shee Tse Koon, DBS’s Singapore country head, offered his own congratulations to “welcome them to our world, where digital banking is already a reality”.

DBS, in particular, was keen to point out that it already offers digital services to retail and SME clients, and does so with a strong capital position.

They are keen to suggest they’re not bothered. They’re bothered.

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