Consumer Internet firm Sea flies solo in bid for full digibank licence

Singapore

CONSUMER Internet company Sea, formerly known as Garena, is the first to officially announce its solo bid for the digital full bank licence in Singapore, even as the New York-listed entity remains loss making.

In a statement released on Tuesday, Sea said it will focus on addressing the unmet needs of millennials and small and medium-sized enterprises (SMEs) in Singapore, which are said to be under-served segments of the market.

It is the fourth applicant to confirm that it is gunning for the two digital full bank licences up for grabs, which will open the way for it to collect deposits from retail customers.

The other three players that have thrown their hats into the ring are Grab and Singtel, a Razer-led consortium, and the V3 and EZ-Link grouping known as Beyond.

The full bank licence requires an eventual capital requirement of S$1.5 billion. The entity will also need to be Singaporean-controlled.

NYSE-listed Sea, with a market capitalisation of about US$19 billion, has three main businesses: e-commerce marketplace Shopee, gaming arm Garena and digital financial services network SeaMoney, previously known as AirPay.

In its statement, the company said it intends to draw on insights from its target segments across its digital ecosystem to "innovate processes, products and services that will improve the lives of individuals and SMEs by reducing the barriers to accessing financial services through technology".

Sea's founder and chairman Forrest Li, and its co-founder and group chief operating officer Gang Ye, are both naturalised Singaporeans.

Mr Li, in particular, is the controlling shareholder with 30.6 per cent of shares and 44.4 per cent of voting rights.

"Through Garena, Shopee and SeaMoney, we have unrivalled insight into the needs and wants of millennials and SMEs across the region," said Mr Li in a statement.

"We have also developed exceptional capabilities in addressing these unmet needs, and have the technology, infrastructure, data analytics capabilities and management experience to design and scale Singapore's first full digital bank."

He added that it has "rigorous standards of corporate governance", which will be essential for a digital bank, on the back of its listing in the US.

In Sea's latest third-quarter results, total adjusted revenue for the group more than doubled to US$763.3 million.

However, it is still in the red, with its Ebitda (earnings before interest, tax, depreciation and amortisation) at negative US$30.8 million, compared with a negative US$183.8 million a year ago.

So far, the only division among the trio that is profitable is Garena, its gaming arm, which has an adjusted Ebitda of US$266 million.

Shopee is the biggest drag on its results. The e-commerce platform recorded more than US$257.2 million in adjusted revenue and S$4.6 billion in gross merchandise value in Q3, but the division's adjusted Ebitda losses deepened 18.1 per cent to a negative US$253.7 million from a year ago.

Digital financial services arm SeaMoney's losses deepened; its adjusted Ebitda is negative US$33.6 million.

The Monetary Authority of Singapore revealed on Tuesday that there were seven applicants for the digital full bank licences. This leaves three more applicants that have yet to announce their bid.

Separately, a consortium comprising the Hong Kong-based AMTD Group, SP Group, Xiaomi Finance and Funding Societies also confirmed that it has applied for a digital wholesale banking licence in Singapore.

In an announcement, the AMTD-led consortium said the parties will look to bank SMEs and entrepreneurs focused on South-east Asia and Greater China - in particular, the Greater Bay Area - in all stages of their growth.

"By combining the strengths and network of resources of the parties, the digital bank is committed to drive and connect these SMEs to the capital markets, facilitate green and sustainable developments and financing options, and improve their productivity and efficiency through an Internet of Things (IoT) platform and smart devices," said the joint statement.

Calvin Choi, chairman and chief executive of AMTD Group, said: "Our ultimate goal is to establish Singapore's most innovative platform bank through an ecosystem of strategic partners to cater for the entire spectrum of funding and business development needs of SMEs and entrepreneurs.

"Eventually, these successful customers will become the most valuable additions and long-term partners to our ecosystem and banking platform."

Chairman and chief executive of Xiaomi Finance Hong Feng, said Singapore is the "pivotal base" of fintech development in South-east Asia.

"As an international Internet company, Xiaomi will leverage its global lead in 5G and artificial Internet of Things (AIoT), together with its partners, build a Singaporean digital bank with superior products, bringing new vigour and vitality into global digital banking and new energy to South-east Asia markets," he said.

MAS will issue up to three digital wholesale bank licences and up to two digital full bank licences, which will permit the taking of retail deposits by the middle of this year.

Successful applicants for a digital wholesale bank licence will be able to serve SMEs and other non-retail segments. The capital requirement is S$100 million, and foreign entities are allowed to take a majority stake.

READ MORE: