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OCBC in talks with Singtel on upcoming virtual bank licence

OCBC will take minority stake in JV where it can tap new customers, markets

MAS is expected to issue new digital bank licence applications later this month.


OVERSEA-CHINESE Banking Corp is in talks with companies including Singapore Telecommunications about seeking one of the city-state's planned virtual bank licences, according to people familiar with the matter.

Singapore's second-largest bank would take a minority stake in any virtual banking joint venture and sees it as a way to tap new customers and markets, the sources said, requesting anonymity because the talks are confidential. For example, Singtel might have clients for its phone services who do not bank with OCBC, one of the sources said.

Banks worldwide face increasing competition from telcos and technology firms that are getting into financial services including payments and lending. But some are partnering, including in Hong Kong where Standard Chartered plc tied up with PCCW Ltd earlier this year to create a virtual bank.

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OCBC's discussions are preliminary, ahead of more details on the conditions for the new licence applications which the Monetary Authority of Singapore (MAS) is expected to issue later this month, the sources said. The eventual choice of partners may change depending on licensing conditions, they added.

"We are open to forging new partnerships and ventures that allow us to serve new segments and new markets," OCBC's head of digital and innovation Pranav Seth said in reply to questions, while declining to comment on any talks on a virtual licene application. A Singtel representative declined to comment. The company's chief executive officer Chua Sock Koong said earlier this month that her company is studying the prospects for a virtual licence.

MAS said in June that it plans to issue as many as five new digital bank licences to non-bank firms as part of efforts to strengthen competition in financial services. The UK and Hong Kong are among major economies that have allowed licences for virtual banks, creating a new generation of rivals for traditional lenders.

The MAS's initiative adds to the digital units that local lenders have been allowed to set up since 2000. The central bank said it will award up to two licences for new retail banks and as many as three for lenders to small and medium-sized enterprises.

Singapore may see several partnerships between banks and technology firms seeking licences, said Varun Mittal, EY's fintech leader for global emerging markets. The tech firms often have customers who are underserved by existing financial institutions, such as domestic workers, delivery riders and property agents or others paid by commission, he added.

Of the big three domestic lenders, OCBC is the only one that does not have a pure-play digital bank, though it has been using technology to facilitate services such as robo-investment advice and instant online account opening for SMEs. DBS Group Holdings operates a digital bank in India and Indonesia, while United Overseas Bank opened one in Thailand earlier this year. BLOOMBERG