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Singapore
FROM early 2022, four digital banks will appear on the Singapore banking scene. The headlines are already raising the battle cry, as the Covid-19 crisis marks digital finance as the way forward. They will also start a new chapter in Singapore’s history of banking liberalization as regulators inject diversity and innovation into the financial sector.
The Grab-Singtel consortium and consumer Internet company Sea took Singapore’s two coveted digital full bank licenses at stake, in a move highly anticipated by industry watchers. But in a surprise twist, only two of the three digital wholesale bank licenses at stake were granted by the Monetary Authority of Singapore (MAS), bringing the total number of digital banks to four in total.
The two digital wholesale bank licenses were secured by China’s Ant Group and a consortium made up of China’s Greenland Financial Holdings, Linklogis Hong Kong and Beijing Co-operative Equity Investment Fund Management, rated a dark horse by analysts.
Greenland Financial is the investment arm of Chinese property developer and state-owned Greenland Group. He previously stated that he intends to build a digital bank that will leverage China’s fintech to serve SMEs (small and medium-sized enterprises) in Singapore.
MAS noted that the two selected full digital bank applicants were “clearly stronger” than the rest. As for the digital wholesale banks, the two that won met expectations and “were judged to be demonstrably stronger on all criteria despite the overall high quality of eligible applicants.”
When asked by The Business Times On whether trade tensions between the United States and China or any excessive concentration of Chinese applicants affected its decision to grant two wholesale digital banking licenses instead of three, MAS stressed that it was “strictly based on merit.”
As digital wholesale banks are introduced as a pilot, MAS said it will review whether to grant more such licenses in the future. The last four to make the cut came from a shortlist of 14 candidates in June, with five full digital banks and nine digital wholesale banks in the running. There were 21 applications at the beginning.
The results of the digital bank were originally scheduled for mid-2020, but were delayed due to Covid-19.
Anthony Tan, CEO and Co-Founder of the Grab Group, said: “With the combined experience of Grab and Singtel in meeting the daily needs of Singaporeans, as well as our deep technology expertise and data-driven insights, the digital bank will advance our goal. to empower more people to get better control of their money and achieve better financial results for themselves, their businesses and their families. ” Yuen Kuan Moon, Designated CEO of the Group, Singtel, added that this milestone comes at a time when the pandemic has underscored the importance of digital platforms.
Former Citibank Singapore Retail Banking Director Charles Wong was officially appointed CEO of digital bank Grab-Singtel. The bank will establish a dedicated team and fill around 200 positions by the end of 2021.
Forrest Li, Sea Group President and CEO, said: “As a proud homegrown company, we look forward to continuing to contribute to the long-term development of our nation’s digital economy, creating more job opportunities in Singapore and empowering our entire community to thrive in the digital age. “
MAS said successful applicants must “meet all relevant prudential requirements and preconditions for licensing before MAS will grant them their respective banking licenses.”
Ant Group said: “We look forward to building stronger and deeper collaborations with all financial services industry players in Singapore, as we work together to make financial services more accessible to SMEs while supporting local talent development in the process. “.
The dominance of Chinese companies in the digital wholesale banking category did not surprise observers, even though the Greenland-led consortium was under the radar. This is despite Ant Group’s initial public offering (IPO) that was withdrawn by Chinese regulators, with higher capital requirements imposed.
Forrester analyst Meng Liu said: “Ant’s IPO cessation is actually spurring its global expansion plan, especially in the Southeast Asian market. Ant has already faced intense competition from its peers in China, and its future growth really depends on its expansion. “
Ravi Menon, managing director of MAS, said the financial regulator applied a “rigorous and merit-based process” to select a robust list of digital banks.
“We expect them to prosper alongside incumbent banks and raise the bar in the industry in providing quality financial services, particularly for businesses and individuals who are currently unserved,” he said.
Digital bank contenders that did not obtain a license include a Razer-led consortium with partners such as Sheng Siong Holdings, a consortium led by Ron Sim’s V3 Group and EZ-Link, and a Matchmove-led offering that includes Singapura Finance.
Others who lost include the iFast-led consortium with China partners Yillion Group and Hande Group, a group led by AMTD consisting of peer-to-peer lending platform financing companies, utility provider SP Group and Xiaomi Finance, as well as a grouping led by Sheng Ye Capital.
Digital banks were first announced by Chief Minister Tharman Shanmugaratnam in June 2019. Regulators in Asia have also been enthusiastic about the idea of non-banks better deploying technology and data analytics to address the financing needs that incumbents might overlook.
Singapore’s batch of digital banks is expected to meet the needs of underserved segments in Singapore and the region, such as SMEs, startups, tour workers and millennials. They may have an advantage when it comes to their technological capabilities and skipping the legacy architecture, but established banks here have also invested in digital banking and are expected to hold their own in the face of new entrants.
Observers agreed that digital banks will have to work hard as they seek to gain market share and profitability.
Wong Nai Seng, Regulatory Risk Lead, Deloitte Southeast Asia said: “Aside from the practical challenges of building a bank and complying with regulatory requirements, digital banks will have to deal with an uncertain economic environment, low interest rates and competitive responses from established banks and other financial services players. “
Singapore’s big three banks welcomed the four digital banks on board and said the move will stimulate the industry.
Wee Ee Cheong, vice president and chief executive officer of UOB, said their presence “will add to the healthy competition”, especially in the area of digital innovations, for the benefit of consumers and businesses in Singapore.
OCBC’s director of consumer financial services Singapore Sunny Quek noted that digital banks are expected to “add some color to the financial space” but are facing an already hyper-competitive environment.
DBS Singapore Director Shee Tse Koon said: “We congratulate the selected candidates and welcome them to our world where digital banking is already a reality.”
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