Friday, 26 February 2021

Grab-Singtel, SEA Group, ANT and Chinese consortium win new digital bank licences in Singapore

By Foo Boon Ping

After a COVID-19 led delay, the Monetary Authority of Singapore finally announced the winners of four of five digital banking licences that it planned to issue, with some notable contenders missing out.

  • The Grab-Singtel alliance and consumer internet company, SEA Group, were awarded the only two digital full bank licences to be issued
  • An entity of ANT and a consortium led by Greenland Financial Holdings, the financial subsidiary of a leading Chinese property group, won two of three digital wholesale bank licences 
  • With only two digital full bank licences on offer, a few notable contenders lost out, including Razer Youth Bank and a StanChart-NTUC collaboration, Phoenix 

After a six-month delay when the Monetary Authority of Singapore (MAS) extended the assessment period for digital bank applications from June 2020 to later in the year, it has finally announced today four of a possible five licences that it intended to issue.

Two digital full bank and two digital wholesale bank licences granted

The central bank awarded the two digital full bank (DFB) licences on offer to a consortium comprising Grab Holdings and Singapore Telecommunications (Singtel); and an entity wholly-owned by Sea Group, a consumer internet company behind online gaming platform, Garena, e-commerce portal, Shopee and e-money provider, SeaMoney.

Two of the three of the digital wholesale bank (DWB) licences were awarded to an entity wholly-owned by Alibaba's financial technology subsidiary, Ant Group; and a consortium comprising Greenland Financial Holdings Group, Linklogis Hong Kong and Beijing Co-operative Equity Investment Fund Management. 

MAS requires the successful applicants to meet all relevant prudential requirements and licensing pre-conditions before the granting of licences and expects the new digital banks to start operations from early 2022.

It had previously announced that it would award banking licences for up to two DFBs and up to three DWBs. There were a total of 14 eligible applications. The applications were assessed on the following criteria: value proposition of business model, incorporating innovative use of technology to serve customer needs and reach under-served segments; ability to manage a prudent and sustainable digital banking business and growth prospects and other contributions to Singapore’s financial centre.

It said that the assessment was done on a holistic basis, taking into account all relevant considerations for each criterion MAS also took into consideration the eligible applicants’ reviews of the business plans and assumptions underpinning their financial projections arising from the impact of the COVID-19 pandemic.

To select the successful applicants, MAS set stringent expectations across the assessment criteria. It said that the two selected DFB applicants were clearly stronger than the other eligible DFB applicants. As for the DWBs, the two selected applicants met MAS’ expectations and were assessed to be demonstrably stronger across the criteria not withstanding the general high quality of the eligible applicants. MAS has thus decided to award banking licences to the two DWBs. As the DWBs are introduced as a pilot, MAS will review whether to grant more of such licences in the future.

Ravi Menon, Managing Director of MAS, said, “MAS applied a rigorous, merit-based process to select a strong slate of digital banks. We expect them to thrive alongside the incumbent banks and raise 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.”

Grab looks set to leverage its licence in Singapore

Following the award of its digital full bank licence, the Grab-Singtel consortium announced the appointment of Citigroup retail bank veteran, Charles Wong, as CEO of the digital bank and will set up a dedicated team and fill around 200 roles by end 2021.

Anthony Tan, Group CEO & Co-Founder of Grab, said, “With Grab and Singtel’s combined experience in meeting the everyday needs of Singaporeans, as well as our deep tech expertise and data-driven insights, the digital bank will further our goal to empower more people to gain better control of their money and achieve better economic outcomes for themselves, their businesses and families.”

Yuen Kuan Moon, Singtel’s Group CEO-designate, added, “As a homegrown company, we look forward to contributing to this exciting digital era of finance for Singapore that will drive greater value creation, build new careers and develop a strong Singaporean core of fintech talent for the industry. We’re pleased to be a part of this significant milestone, especially at a time when the pandemic has underscored the importance of digital platforms, making digital banking even more relevant now to meet the everyday needs of our customers.”

Grab which started out as a ride-hailing company has since expanded into food delivery, e-commerce, e-payments and financial sevices. It aims to be Southeast Asia's most dominant super-app akin to Chinese giants such as ANT and Tencent and already operates in eight of the ten countries in the region. It is also reported to be in talks over a potential merger with Jakarta-based rival Gojek to create the region's largest mobile commerce player. The successful digital bank licence application in Singapore could help pave the way for it to do the same in other markets.  

Financial regulators in many Asia Pacific countries have already begun their digital banking – also known as neo, virtual, and challenger banking – licence journeys. Australia, Hong Kong, China, India, Japan, South Korea and Taiwan have framed their own virtual banking regulations and issued digital banking licenses.

The Hong Kong Monetary Authority (HKMA) has issued eight virtual bank licences since March 2019 to various local banks, fintech, insurance companies and big tech companies. The launch of virtual banks is said to be one of the key components of HKMA’s Smart Banking initiatives.

These virtual banks were expected to open within the six to nine months but the pandemic has affected such plans. Some of the approved virtual banks have delayed their launch with the exception of ZA Bank who has officially begun operations following a three-month trial in March 2020. Other virtual banks such as Airstar Bank, Ant Bank, WeLab Bank, Fusion Bank and Mox Bank – piloted operations in the HKMA’s Fintech Supervisory Sandbox and launched their services later in the year. 

Notable contenders missed out 

With only two digital full bank licences on offer, a few notable contenders lost out. Razer Fintech, the financial technology arm of gaming company Razer, led a consortium of strategic partners comprising Sheng Siong Holdings, FWD, LinkSure Global and Insignia Ventures Partners to make a bid with Razer Youth Bank that has a youth and millennial focused proposition. While Standard Chartered Bank partnered NTUC, to launch a bid with Phoenix, looking to repeat its success in Hong Kong, where its virtual bank, MOX, was granted a licence. 

Lee Li Meng, CEO, Razer Fintech, commented after the announcement, "Razer Fintech business into digital banking remains unchanged. Right from the beginning, we have always had the ambition to take Razer Youth Bank global, given Razer’s massive brand affinity with an intensely loyal fan base of over 100 million globally, while collaborating closely with our partners and best-in-class category leaders, as evidenced in our recent announcements with Franklin Templeton and Visa on wealth management services and providing prepaid card solutions respectively to our target segment of youth and millennials."

He added, "We intend to roll out Razer Youth Bank where Razer and Razer Fintech have already established a strong user base and local business presence, be it in regional countries such as Malaysia and the Philippines where digital banking application processes are expected to kickstart in the near term or other regions, such as Europe, Middle East or Latin America where regulators are similarly supportive of innovation in the banking sector to better serve the unbanked and underserved segments of the economy."

 

 

 

 

 



Keywords: Digital Bank Licences, Digital Full Bank (dfb), Digital Wholesale Bank (dwb), E-Commerce, Retail Banking, Wealth Management, Neobank, Virtual Banks
Institution: Monetary Authority Of Singapore (MAS), Grab, Singtel, Sea Group, Garena, Portal, Shopee, SeaMoney, Alibaba, ANT Group, Greenland Financial Holdings Group, Linklogis Hong Kong, Beijing Co-operative Equity Investment Fund Management, Citigroup,  Razer Fintech, Razer,  Sheng Siong Holdings, FWD, LinkSure Global, Insignia Ventures Standard Chartered Bank, NTUC, Phoenix, MOX,  Razer Youth Bank, Franklin Templeton, Visa, Hong Kong Monetary Authority (HKMA), ZA Bank, Airstar Bank, Ant Bank, WeLab Bank, Fusion Bank
Guest: Ravi Menon, Charles Wong, Anthony Tan, Yuen Kuan Moon, Lee Li Meng
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