Dowry's S$1.5b - but suitors are queueing at virtual bank altar

Singapore

THIS may be Singapore's greatest speed-dating exercise.

Roughly a dozen new players are flirting with the banking industry, a heavily regulated sector that's well aware the biggest liberalisation of the Singapore financial sector since 1999 would come to pass this year.

BT understands new entrants are toying with ideas of a consortia with other non-banking players, and traditional lenders, with an eye on the virtual bank prize. With SingTel already signalling some interest publicly, its peer M1 - which is part of the Keppel conglomerate - has left the door open to the option as well. Other names bandied about include property firms and utilities providers that are unusual parties to a digital banking partnerships.

Singapore will be offering up to five digital banking licences, first announced by Senior Minister and chairman of the Monetary Authority of Singapore (MAS) Tharman Shanmugaratnam two months ago.

Among the known suitors, ride-hailing firm Grab and Vertex-backed peer-to-peer lender Validus Capital have openly signalled their interest in applying for the licence. Besides local names, European digital bank startups such as Revolut are expected to be taking a closer look, as well as Ping An Insurance's fintech arm OneConnect.

To be sure, there is no certainty that sparks will fly in the end, because these new players are swiping right - Tinder-lingo for showing interest to potential dates - on most fresh faces at this point.

MAS is due to open up digital banking applications by the end of this week, at which point, all aspiring applicants are expected to pore through the criteria, and in fairness, that may also take down the enthusiasm several notches.

The maximum of five new digital-bank licences to be issued in time will comprise up to two digital full-bank licences, and up to three digital wholesale bank licences. They must all meet the same capital requirements as local banks.

Applications for the digital full-bank licences are open to companies headquartered in and controlled by Singaporeans. Foreign companies can apply for these full-bank licences if they form a joint venture with a Singapore company. Applicants must show clearly how they can tackle unmet needs, and that they have a sustainable digital banking business model, MAS said.

Any competition deemed "value-destructive" will not qualify.

What can non-financial players bring to the table? The play appears to be network and data.

Wong Nai Seng, South-east Asia leader for the Deloitte APAC Centre for Regulatory Strategy, said non-bank players with large ecosystems can leverage their rich data pools to identify new business segments and manage risks.

"They can also offer fresh ways to embed financial services within their supply chains and customer networks," said Mr Wong, a former senior regulator at MAS.

"Others may contribute leading edge technologies and design capabilities to enable a digital bank to provide services more seamlessly, efficiently and at a lower cost."

An M1 spokesman said the company is "constantly on the lookout for opportunities where we can create value for our stakeholders".

UK-based Revolut is currently in talks with "several big, established companies" in Singapore to explore possible partnerships before coming to a decision.

"We are still doing our homework," Jakub Zakrzewski, Revolut's general manager for Asia-Pacific, told BT, noting that the capital requirement of S$1.5 billion is "very high".

"It's a bit more than a relationship, it's a marriage so we really need to find the right partner."

In response to queries, a Grab spokesman said the ride-hailing firm is "patiently waiting" for the criteria for the MAS licensing framework to be defined. "However, Grab is always open to partnerships that work towards the objectives of addressing customer segments more effectively."

Ping An's OneConnect, which has developed credit-scoring models for SME lending, declined to say directly if it would apply for a digital banking licence in Singapore, as it did in Hong Kong. Tan Bin Ru, CEO of OneConnect Singapore, said the firm is still "taking stock of the buzz".

"With deep data of big-ticket transactions amassed from Ping An's five ecosystems in finance, healthcare, automobile, real estate, and smart cities, we can help banks to underwrite bigger loans to SMEs, who make up 99 per cent of businesses in Singapore, to scale and ride the digital wave."

Given the buzz, she also cautioned about the "technological challenges" in building a true digital bank.

"Virtual banking is not just about branchless banks, it's about cracking a new banking journey from a customer's point of view," she said.

Co-chief executive of Ping An Insurance Jessica Tan told BT in 2018 that OneConnect is more keen on selling the "exponential" growth of the tech business to all financial players, rather than use its services exclusively as a bank.

So while OneConnect is due to launch its service via its virtual banking licence in Hong Kong by the end of this year, it plans to provide lending to SMEs and individuals, and then create a platform for SME loans that would be sold to both Ping An and other lenders, she told South China Morning Post this month.

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