iFast rides on the back of Covid-linked trading boom

Singapore

AS investors took advantage of the market correction in March this year to increase their stock holdings, mainboard-listed fintech firm iFast Corporation benefited from the increased market activity. For the three months ended March 31, 2020, iFast generated record revenue and profits.

Lim Chung Chun, chairman and chief executive of iFast Corporation, told The Business Times: "Interestingly, this time around, on all our platforms, we are finding that investors seem to be buying more because prices are low. We are seeing a lot of this happening, more so than in previous downturns, perhaps because people expect a quicker recovery."

For the quarter, non-recurring net revenue, which includes transaction fees for unit trusts, bonds, stocks, exchange-traded funds and forex conversions, rose 96 per cent to S$4.83 million. This translates to about a quarter of total revenue.

The company also saw a record number of account openings in the quarter, especially for its FSMOne division in Singapore. Investors on FSMOne Singapore can trade in Singapore, Hong Kong and US stocks, trusts and mutual funds, bonds and insurance products. Efforts to make registrations more seamless in the last couple of years are now paying off, Mr Lim said.

The group's assets under administration (AUA) declined 4.6 per cent to S$9.54 billion during the quarter. But Mr Lim said this decline was "not huge" considering the extent of the sell-down in global financial markets. As equity prices recover, AUA is rising. As at April 22, 2020, iFast's AUA had recovered to reach the S$10 billion milestone clocked at the end of 2019.

Asked what investors here like to trade, Mr Lim says he has observed a growing interest in US stocks as well as US and Singapore exchange-traded funds amid a switch in preference in the market for passive strategies over active ones.

Global ambitions

iFast is among several companies competing for one of three digital wholesale banking licences to be issued by the Monetary Authority of Singapore. It partnered Yillion Group and Hande Group to submit an application, and had said that it was targeting an ambitious 20 per cent return on equity from its digital banking outfit in the next five years.

The award of the licences has been delayed to the second half of this year, from the originally proposed June, given the Covid-19 pandemic.

But Mr Lim says fintech services generally have not been able to effectively cross borders. "Even global banks operate by going into the individual countries to set up subsidiaries and branches, so they are not really doing business the global way of, say, a company like Netflix, which by operating from its US base, is able to tap into the global market potential of the world."

He puts it down to differing regulations and compliance requirements in different countries, which make globalising the business harder. As an example, he cites the pain of setting up a cross-border bank account.

"Singaporeans may not feel the need to open bank accounts in other countries but many people abroad want to have bank accounts in Singapore. Yet non-residents are unable to do so seamlessly," he said.

He is hoping that a digital banking licence will allow iFast to become a more effective global player. Combining a global business model and a digital banking licence, he hopes, will allow iFast's wealth management business to grow across borders.

iFast had previously vied for a virtual banking licence in Hong Kong as well, along with 28 other hopefuls, but was unsuccessful. The eight licences were eventually awarded to a mix of mainland Chinese and Hong Kong companies. Here in Singapore, 21 applications have been made for five licences - two full bank licences and three wholesale bank licences.

Reaching for scale

For now, Mr Lim's says his priority is for iFast to gain further scale in its overseas markets, namely Hong Kong, Malaysia, China and India. Singapore is its biggest market, making up close to two-thirds of the overall revenue pie. Mr Lim still sees room for growth locally too, through an increase in market share.

The company is also mulling expansion into South-east Asia. "Thailand and Indonesia are some natural countries to consider, although we don't have immediate plans to venture there," he said.

Its loss-incurring Chinese business is still facing teething problems. In the first quarter of this year, it registered a net loss of S$1.08 million. But performance appears to be improving. Despite the Covid-19 situation, AUA of the Chinese unit grew 24 per cent year-on-year to about S$120 million as at end-March.

On the products side, iFast is looking at allowing investors to trade in Chinese stocks via the Stock Connect between Hong Kong and the Shanghai and Shenzhen stock exchanges. This could come as early as next year. It also hopes to allow financial advisers to access ETFs listed in London.

Asked if rising digitalisation among incumbent banks might pose a threat to iFast's fintech business, for instance when they start to replace more relationship managers with do-it-yourself platforms, Mr Lim said he is not worried.

"In theory, the banks should have no problems putting in place the technology; in practice, it's more of to what extent they want the technology to be the dominant channel. You'll actually find a lot of banks not wanting to go fully into digital because then, a large part of their existing revenue streams would be disrupted and eroded," he said.

Singapore Press Holdings, which publishes The Business Times, holds an approximately 15 per cent stake in iFast through its subsidiary SPH Invest.