Entering into a partnership with an e-commerce company to get a digital bank licence could be the quickest way for branchless banks and technology companies to gain scale as they look to grow in Singapore and South-east Asia, a report by S&P GLobal has suggested.
"Affiliation with technology platforms serving large pools of consumers and small businesses could be key to the future of both freshly minted digital banks and incumbent banks with digital capabilities," said S&P Global Market Intelligence.
This comes as e-commerce sales in the six largest economies are estimated to grow to US$79.29 billion in 2022 from $41.28 billion in 2019, according to the report.
It noted that Sea Ltd's Shopee and Alibaba Group Holding-owned Lazada South East Asia dominate the e-commerce industry in Southeast Asia, and they are engaging shoppers and merchants through digital payments and lending to shore up activity on their marketplaces across these countries.
It also said affiliates of the two e-commerce companies have applied for bank licenses in Singapore and will likely be interested in other Southeast Asian countries, adding that it expects the two to become "principal actors" in the evolution of digital banking in the region.
If successful, S&P Global Market Intelligence said both Sea and the Grab-led consortium could use their banking licenses to serve their current ecosystems, although it believes Sea has greater lending opportunities given that online shopping transaction values tend to be bigger than ride fares.
In addition, both Shopee and Lazada will have greater banking needs in other large Southeast Asian markets, where cash-based payment options appear to be more popular than in Singapore, S&P Global Market Intelligence said. Both marketplaces offer cash-on-delivery options in Thailand, Indonesia, Vietnam and the Philippines, which lead to longer cash conversion cycles and pose risks to merchants.
"Offering banking services, including credit cards and other unsecured lending options, to consumers in underbanked countries allows e-commerce companies to shift consumers away from cash-based payments and drive greater activity on their platforms," the report said.
We previously made several references to 451 Research. The attribution to 451 Research only applies to the data provision that “e-commerce sales in the six largest economies are estimated to grow to $79.29 billion in 2022 from $41.28 billion in 2019.” All commentary and analytics should instead be attributed to ‘S&P Global Market Intelligence'. The above copy has been revised to reflect that.