Temasek-backed firm leads consortium to vie for digital wholesale bank licence

Singapore

A TEMASEK-BACKED company, with more than S$1 billion in market capitalisation, is leading a consortium to vie for one of the three wholesale bank licences up for grabs in Singapore.

Hong Kong-listed Sheng Ye Capital, a supply chain finance company founded by Singaporean Jeff Tung, is teaming up with financial conglomerate PhillipCapital and fintech Advance.AI in the quest to build a data-driven "next generation" SME bank that will help businesses grow and expand into Asia. "We believe we can build the bank into a regional franchise with Singapore as the hub," Mr Tung told The Business Times.

All three consortium members are owned or led by Singaporeans, compared with many of the other Chinese wholesale banking applicants that have thrown their hats into the ring such as Jack Ma's Ant Financial and TikTok-owner ByteDance.

Among the trio, Sheng Ye Capital and Advance.AI are backed by Temasek subsidiary Pavilion Capital.

The digital wholesale bank licence - which allows the successful licensee to serve SMEs and other non-retail segments - requires a capital requirement of S$100 million and allows foreign entities to take a majority stake.

In comparison, the two digital full bank licences allow licensees to take deposits from retail customers and require an eventual capital requirement of S$1.5 billion. The entities also need to be Singaporean-controlled.

For a start, the Sheng Ye Capital-led consortium aims to focus on SME segments which they consider to be "severe" in their lack of funding by incumbent lenders. The group declined to name them, but they could potentially be in the infrastructure, energy and healthcare segments, as these are some of the key SME clients of Sheng Ye Capital's business in China.

In the long run, it aims to work across ecosystems and industries "to partner everyone", said Mr Tung.

Sheng Ye Capital is a relatively unknown name in Singapore as its business is currently mostly in China, but it has originated more than US$6 billion worth of loans serving SMEs there in the past five years. It built its own proprietary technology architecture that collects and analyses multiple sources of live data to assess risk and credit-worthiness of SMEs.

"Our mission has been to leverage technology to reshape traditional supply chain finance and address SMEs' challenge of financing," noted Mr Tung. As the consortium lead, Sheng Ye Capital aims to tap on its experience partnering SMEs to create a "profitable and sustainable" digital bank.

He pointed out that its business in China is profitable, even with the complex and competitive environment there.

In its latest interim report, Sheng Ye Capital's net profit stood at 118.76 million yuan (S$23 million) for the six months ended June 30, 2019, up 60 per cent from 74.38 million yuan for the same period a year ago.

With the digital bank licence in Singapore, it is setting its sights to expand its business into South-east Asia through the consortium.

The other consortium member PhillipCapital is taking a leap into digital banking as it is viewed as an opportunity to take the financial conglomerate to "the next level".

Linus Lim, director and co-chief investment officer, PhillipCapital said it is a "natural extension" for the group to further provide financial services to SMEs, after decades of helping individuals and institutions with their investments.

"A sizeable proportion of our clientele today are SME owners, who trust us with their personal financial assets," explained Mr Lim. "We have received inbound queries to also offer financial solutions to their SMEs and see this new initiative as a direct extension to better serve our clients."

The group is already assisting SMEs with hedging volatility, financing and earning a better return on their assets, he added.

Its role in the consortium is to serve as the turnkey solution financial services provider on the back of its wide range of financial product solutions and track record operating in Singapore and the region, he added.

Advance.AI is the final piece of the consortium, bringing to the table its technological capabilities. It taps on Big Data and artificial intelligence (AI) for fraud detection and credit scoring, serving over 400 enterprises - mostly financial institutions and fintechs.

It has a fast-growing consumer finance business in emerging South-east Asia, with its headquarters in Singapore.

In Indonesia, for instance, the fintech provides AI-enabled solutions to local banks to automate client onboarding, reduce fraud risks and assess customer worthiness. These technologies empower financial institutions to serve the under-banked population, or those without access to traditional sources.

Mi Li, chief marketing officer, Advance.AI, said: "The digital wholesale bank licence is an opportunity for us to impact another under-served segment - Singapore SMEs, who often find it impossible to get the credit they need to grow their business."

The Sheng Ye Capital-led consortium is the latest addition to the growing list of confirmed digital wholesale bank licence contenders, including Ant Financial, ByteDance, Funding Societies and the iFast consortium.

Applications for the digital banks closed on Dec 31 and results are likely to be in mid-2020.

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