Singapore welcomes four digital banks with Grab-Singtel, Sea nabbing coveted full-bank licences

THE Grab-Singtel tie-up and consumer Internet company Sea bagged the two coveted digital full-bank licences up for grabs, the Monetary Authority of Singapore (MAS) announced Friday evening.

They were among the four digital bank licences awarded by MAS, emerging victorious from a total of 21 applications tossed in the ring.

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

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.

MAS expects the new digital banks to commence operations from early 2022. It added that successful applicants must "meet all relevant prudential requirements and licensing preconditions before MAS grants them their respective banking licences".

The applications were assessed on the following criteria:

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1) value proposition of business model, incorporating innovative use of technology to serve customer needs and reach under-served segments;

2) ability to manage a prudent and sustainable digital banking business;

3) growth prospects and other contributions to Singapore's financial centre.

MAS also said that it 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.

In particular, 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 MAS's expectations and were "assessed to be demonstrably stronger across the criteria notwithstanding the general high quality of the eligible applicants".

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.

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 did not get the licence include the iFast-led consortium with China partners Yillion Group and Hande Group, and an AMTD-led group consisting of peer-to-peer lending platform Funding Societies, utilities provider SP Group, and Xiaomi Finance.

This marks a new chapter in Singapore's banking liberalisation story, following the announcement of the new digital banks by Senior Minister Tharman Shanmugaratnam back 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 small and medium-sized enterprises (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.

Digital full banks will be able to take deposits from retail customers, while digital wholesale banks will generally cater to SMEs and other non-retail segments.

They are expected to establish a "path towards profitability" based on a five-year financial projection, according to criteria from MAS.

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

In a joint statement, Yuen Kuan Moon, Group CEO-designate, Singtel, said: "We're excited and privileged to be given this opportunity to redefine banking in Singapore.

"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."

Anthony Tan, group CEO and 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."

In a media release, Sea said through its three platforms - Shopee, Garena, and SeaMoney - it is already "deeply integrated" into Singapore's digital economy with young consumers and SMEs.

Its digital bank will draw on insights about the needs of these users from across Sea's digital ecosystem to "innovate processes, products, and services" that will improve the lives of young consumers and SMEs in Singapore. and support the growth of the country's digital economy by reducing the barriers to accessing financial services through technology.

Forrest Li, chairman and group chief executive officer said: "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."

In a statement, Ant Group said it is "grateful for this opportunity to further contribute to accelerating digital financial innovation and inclusion in Singapore and the region". It said that over the years, Ant Group has accumulated substantial experience and proven success, especially in China where it partners financial institutions to serve the needs of SMEs.

"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."