Grab-Singtel, Sea and Ant Group bag Singapore's first digital bank licences amid surprise twist

Singapore

FROM early 2022, four digital banks will emerge onto Singapore's banking scene. The incumbents are already sounding the battle cry as the Covid-19 crisis marks digital finance as the way forward. They will also start a new chapter in Singapore's banking liberalisation story as regulators inject diversity and innovation into the financial sector.

The Grab-Singtel consortium and consumer Internet company Sea bagged the two coveted Singapore digital full-bank licences up for grabs, in a move widely expected by industry watchers. But in a surprise twist, only two out of the three digital wholesale bank licences up for grabs were awarded by the Monetary Authority of Singapore (MAS), bringing the total number of digital banks to four altogether.

The two digital wholesale bank licences were clinched by China's Ant Group, and a consortium comprising China's Greenland Financial Holdings, Linklogis Hong Kong, and Beijing Co-operative Equity Investment Fund Management, dubbed as a dark horse by analysts.

Greenland Financial is the investment arm of Chinese real estate developer and state-owned enterprise Greenland Group. It previously stated that it intends to build a digital bank that will tap China's financial technology to serve SMEs (small and medium-sized enterprises) in Singapore.

MAS noted that the two selected digital full bank applicants were "clearly stronger" than the rest. As for the digital wholesale banks, the two that won met expectations and were "assessed to be demonstrably stronger across the criteria notwithstanding the general high quality of the eligible applicants".

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When asked by The Business Times on whether US-China trade tensions or any over-concentration of Chinese applicants impacted their decision to award two digital wholesale bank licences instead of three, MAS stressed that it was "strictly merit-based".

As the digital wholesale banks are introduced as a pilot, MAS said it will review whether to grant more of such licences in the future. The final four that made the cut came from a shortlist of 14 candidates in June, with five digital full banks and nine digital wholesale banks left in the running. There were 21 applications at the start.

The digital bank results were originally slated for mid-2020 but were delayed due to Covid-19.

Anthony Tan, Grab's group CEO and co-founder, 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, Group CEO-designate, Singtel, added that this milestone comes at a time when the pandemic has underscored the importance of digital platforms.

Former Citibank Singapore's retail banking head Charles Wong was officially appointed as CEO of the Grab-Singtel digital bank. The bank will set up a dedicated team and fill around 200 roles by end-2021.

Forrest Li, chairman and group CEO of Sea, said: "As a proudly homegrown company, we look forward to further contributing to the long-term development of our nation's digital economy, creating more employment opportunities in Singapore, and empowering our whole community to thrive in the digital era."

MAS said that successful applicants must "meet all relevant prudential requirements and licensing preconditions before MAS grants them their respective banking licences".

Ant Group said: "We look forward to building stronger and deeper collaborations with all participants in the financial services industry in Singapore, as we work together to make financial services more accessible for SMEs while supporting local talent development in the process."

The dominance of Chinese companies in the digital wholesale bank category did not come as a surprise to observers, even though the Greenland-led consortium was under the radar. This is despite Ant Group's initial public offering (IPO) that was pulled by Chinese regulators, with higher capital requirements imposed.

Meng Liu, analyst at Forrester, said: "Ant's IPO halt is actually incentivising its global expansion plan especially in the South-east Asia market. Ant has already faced intense competition from their peers in China, and their future growth really depends on their global expansion."

Ravi Menon, managing director of MAS, said that the financial regulator 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," he said.

Digital bank contenders that failed to land a licence include a Razer-led consortium with partners such as Sheng Siong Holdings, a consortium led by Ron Sim's V3 Group and EZ-Link, and a Matchmove-led bid that includes Singapura Finance.

Others that lost out include the iFast-led consortium with China partners Yillion Group and Hande Group, an AMTD-led group consisting of peer-to-peer lending platform Funding Societies, utilities provider SP Group and Xiaomi Finance, as well as a grouping led by Sheng Ye Capital.

The digital banks were first announced by Senior Minister Tharman Shanmugaratnam in June 2019. Regulators in Asia have also warmed to the idea of having non-banks better deploy technology and data analytics to tackle financing needs that might be missed by the incumbents.

Singapore's batch of digital banks are expected to meet the needs of under-served segments in Singapore and the region, such as SMEs, startups, gig workers and millennials. They may have an edge when it comes to their tech capabilities and in skipping past legacy architecture, but incumbent banks here have also invested in digital banking and are expected to hold their own against the new entrants.

Observers concurred that the digital banks will have their work cut out as they seek to gain market share and profitability.

Wong Nai Seng, regulatory risk leader, Deloitte Southeast Asia said: "Apart from the practical challenges of building up a bank and meeting regulatory requirements, the digital banks will need to contend with an uncertain economic environment, low interest rates and competitive responses from the incumbent banks and other financial services players."

Singapore's Big Three banks welcomed the four digital banks aboard and said the move will spur the industry.

Wee Ee Cheong, deputy chairman and CEO, UOB, noted that their presence will "add to the healthy competition", especially in the area of digital innovations, for the benefit of Singapore's consumers and businesses.

OCBC's head of consumer financial services Singapore Sunny Quek noted that the digital banks are "expected to add some colour to the financial space", but face an already hyper-competitive environment.

DBS's Singapore country head Shee Tse Koon said: "We congratulate the successful applicants and welcome them to our world, where digital banking is already a reality."

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