Singapore lender still using faxes seeks virtual bank licence

Singapore

SINGAPORE'S Hong Leong Finance views the country's plan to issue virtual-banking licences as an opportunity to find new customers and re-invent itself as a tech-savvy lender to the nation's new businesses.

The firm, founded in 1961, has been in talks with financial-technology (fintech) companies about a joint application for one of the licences. Company president Ang Tang Chor, 70, is looking for a partner that will help it apply technology to its lending decisions, with a view to doing more business with millennials and newly established firms.

"We have the customer base, we have the reach but we don't have the platform."

The Monetary Authority of Singapore announced plans this year to grant up to five virtual bank licences to fintechs and other non-bank firms to introduce more competition into the financial industry. Applications for the retail and wholesale licences are due by year's end.

About 70 per cent of Hong Leong's loan book comprises advances to small and medium-sized businesses in areas such as property development and food and beverages; lending to retail customers accounts for the rest.

Mr Ang said Hong Leong requires potential borrowers to provide a history of financial information before approving new loans; this can be a problem for some individuals and smaller firms. By tying up with a tech firm for a virtual licence, Hong Leong hopes to learn how to sift new data sets, such as real-time information on company invoices, or individuals' credit card records and social media posts.

Mr Ang said: "The fintechs have one advantage: they lend against data. That is now slowly becoming more important to financial institutions", which have traditionally used criteria such as company balance sheets.

DBS Bank analyst Lim Rui Wen, who has a "buy" rating on Hong Leong, said Singapore's financing landscape is dominated by traditional lenders and banks, and that virtual banks can perhaps fill the gap for smaller loans.

Hong Leong, which still uses faxes in parts of its application process, is also looking to introduce payment cards for expatriate workers and instant credit-risk assessments for car loans.

With a market capitalisation of S$1.2 billion, Hong Leong held total deposits of S$11.9 billion as of June 30.

Mr Ang declined to name the fintech firms he has been talking to. Some are reluctant to enter tie-ups because they want to submit solo applications, he said.

In any case, Hong Leong needs to adapt to appeal to younger clients. "The next generation of depositors and clients are going to be people who are tech-savvy, so we'll have to go in that direction," he said. BLOOMBERG