Fintech MatchMove sees digital banking bid as natural next step

Singapore

TO LOCAL fintech MatchMove, moving into digital banking is a natural extension of its payments business - and a plan that has been long in the works.

It has now officially put its ambitions on the table, bidding for a digital full bank licence in Singapore that comes with a hefty S$1.5 billion capital requirement, in the hope that this will be a prelude to digital banking expansion into South-east Asia.

To do so, MatchMove has brought in a digital-banking partner in a fintech tied to a South-east Asia giant - Thai food conglomerate CP Group - with the Thai startup in itself holding ambitions to disrupt the remittance business in this region.

By bringing together CP Group-linked Lightnet, finance company Singapura Finance, and UK fintech OpenPayd, MatchMove thinks a consortium applying for a digital full bank licence will allow it to complete the missing pieces of its existing payments business.

The digital bank, for which MatchMove will own a majority stake in via the consortium, will target digitally underserved segments, including small businesses, and gig workers, its founder and group CEO Shailesh Naik told The Business Times.

"We've been thinking about digital banking in South-east Asia for the last two years now, and our preparations started in earnest this time last year with the view that it's not just for Singapore, but the region," said Mr Naik. "So before the regulations came out, we had already started moving."

The fintech, which has a Major Payment Institutions licence under the Payment Services Act, now works with businesses to digitise payments, and works with businesses to issue virtual and physical cards instantly.(see amendment note)

It also originates loans, but works with external parties to extend credit to small- and medium-sized enterprises (SMEs) and individuals. With a digital banking licence, MatchMove hopes to be able to take in deposits to be able to lend directly with its own balance sheet.

Following its digital banking bid in Singapore, MatchMove is looking to gain a foothold across Asia-Pacific and the Middle East in the next decade, with plans to secure other digital banking licences across the region which will be a key part of its strategy, he added. The Singapore-headquartered startup currently has a presence in India, Indonesia, Vietnam and the Philippines.

If those plans come to fruition, about 500 jobs in the digital bank will be created over time, with Singapore the place where the key functions will be managed, he noted.

Meanwhile, Lightnet, which is co-founded by Chatchaval Jiaravanon (whose family runs CP Group) and former investment banker Tridbodi Arunanondchai, is looking to challenge the way remittances are usually done. Backed by United Overseas Bank's venture unit and Hanwha Investment & Securities, Lightnet wants to build a whole new remittance infrastructure services by using blockchain to connect existing financial systems with its network of cash agents and wallets.

In a media statement, Mr Arunanondchai, said the partnership with MatchMove is "aligned to our regional banking aspirations".

"Furthermore, there are many synergies between our organisations beyond Singapore which we intend to explore and I believe we can develop a compelling proposition for the under-banked segment across the region," he said.

The digital full-bank licence will see stiff competition with names such as Sea, a Razer consortium, and the Grab-Singtel partnership vying for the two licences up for grabs.

But Mr Naik believes that his consortium has a "compelling proposition" given that MatchMove is a pure-play fintech that already has capabilities similar to a bank.

"We've got a business model that allows us to deliver banking-as-a-service, not to an existing consumer base only, but one that allows continued expansion into more segments and into the region," he noted.

SGX-listed Singapura Finance, which has a minority stake of about 1.6 per cent in MatchMove, thinks this could boost the traditional lender's moves to go digital, and to diversify into "new digital native segments and products", said Jamie Teo, CEO of Singapura Finance.

MatchMove also looked for partners with a large, ready base of consumers or SMEs that they already service or have a relationship with that they can tap on immediately. It now has about 70 customers.

"We do not believe in cash burn and acquiring customers through incentives of that sort," said Mr Naik.

He is projecting that MatchMove will become profitable by this year. He declined to give exact figures for 2019, but said that losses have narrowed since 2017 with revenue up 400 per cent. He said the startup is now valued at US$305 million, following its last round of fundraising.

Despite the virus outbreak that is hurting the profitability prospects of the traditional banks, Mr Naik believes that the impact is only in the short term.

"Going forward, I think the argument for digital banking is made much more acute now," he pointed out. "Now if there is any kind of service that requires face to face (interaction) or physical travel, this could be the time when the industry wakes up and says, actually we don't need to do that anymore and that there are other ways to do it."

Results of the digital bank licences will be out mid-2020 and the new digital banks are expected to start operations by the middle of 2021.

Amendment note: The article earlier stated that MatchMove has a capital markets services licence - that actually belongs to peer-to-peer lender MoolahSense, in which it has a stake.