The Race For Singapore’s Digital Banking Licenses

In late June, the Monetary Authority of Singapore (MAS) sent a ripple through the global financial services ecosystem with the announcement of its intention to issue five digital bank licenses to eligible applicants.

“The new digital bank licenses mark the next chapter in Singapore’s banking liberalization journey,” said Tharman Shanmugaratnam, senior minister and chairman of MAS. “We welcome firms with innovative value propositions to apply for the digital bank licenses, even if they have not yet established a track record in banking,”

The move was widely considered the biggest shake-up in Singapore’s financial services market in two decades, during which time the landscape has been mostly controlled by the nation’s large traditional banks: DBS Group Holdings Ltd., Oversea-Chinese Banking Corp. and United Overseas Bank Ltd.

According to Shanmugaratnam, the rapid advance of digitization throughout all elements of the Singaporean and the global economy has required “a fundamental re-think of the role of banks, in most advanced financial centers.”

The move follows Hong Kong’s early 2019 decision to issue digital banking licenses as the two economies are strong competitors in the region.

As part of that rethinking, but with an eye toward not overly fragmenting Singapore’s small domestic retail banking market — the issuance of digital banking licenses will start small. Only two of the licenses will full digital banking licenses, while the other three will be wholesale banking licenses. Wholesale license holders will be limited to serving corporate clients only — full license holders will need to have capital reserves S$1.5 billion ($1.1 billion), the wholesale license holders will need reserves of  S$100 million.

And after six months of waiting to see which firms exactly would be competing to snatch up those licenses, the answers started rolling out with the first week of 2020. So far, Ant Financial, Grab and Singtel and a consortium of firms led by Razer have all officially stepped into the light with formal applications.

What is each player bringing to the race?

Grab + Singtel

The first in to apply for a full digital banking license before 2019 had flipped to 2020 was a partner play by Singapore FinTech and ridesharing firm Grab and the nation’s largest telecom provider, Singtel.  Grab will hold about 60 percent of the license, Singtel will hold the rest.

The consortium plans to build its offering to “digital-first consumers,” as well as small and medium enterprises that lack access to credit.

The move speeds along Grab’s expansion from a simple ride-hailing service to a financial services firm with a suite of services built overtop of its core platform and digital wallet created to support it, GrabPay. Grab does not offer official numbers for how many GrabPay users there are currently, but it does note that the app has been downloaded onto more than 166 million mobile devices in Southeast Asia, according to published reports. There are some 630 million residents in that region.

Singtel has delved deeper into financial services as its core telecom business has seen its growth slow in the last 12 months.  It has also been offering its own mobile payments service Dash — though it has seen limited use success outside of use within Singtel’s platform.

The new digital banking licenses in Singapore, however, represent a natural opportunity for the firm to expand out on its mobile financial services, according to Arthur Lang, CEO of Singtel’s International Group.

“We want to fundamentally change the way consumers and enterprises bank,” he noted to Bloomberg.

As the week has gone on, it is becoming clear they aren’t the only ones interesting in being in on the ground for said fundamental change.

Razer And The Youth Bank

Following the entrance of Grab and Singtel into the race for one of the two full digital banking license, another player threw its hat into the ring: a consortium of Singaporean entrepreneurs, Asian billionaires and digital gaming company Razer Inc. The five partners working with Razer are Sheng Siong Holdings Pte, FWD Group; LinkSure Global Holdings Ltd.; Insignia Ventures Partners; and Carro, an online car marketplace.

Razer Fintech will own about 60 percent stake in the group, while five partners will hold the remaining 40 percent. As of early 2020, Razer has about 70 million registered users across its various software offerings.  According to Lee Li Meng, Razer’s chief strategy officer, the intention of the consortium is not to compete with banks for existent banking customers; rather, it will leverage its already young-skewing customer base to pursue the currently underserved youth market in Singapore.

“Youth and millennials are underserved even in a crowded space like Singapore,” Meng said in a statement. The bank offering, as Razer envisions at present, will target consumers between ages 12 and 35.

“We want to help them from a young age,” Lee said, noting that most young people grow up with little financial literacy education, and often find themselves struggling in adulthood.

“We’ve thought about this long and hard,” Lee said. “We believe that we can do something revolutionary here in Singapore.”

Speaking of looking to do something revolutionary in Singapore — Alibaba threw its name into the license race on the same day the Razer consortium did.

Though it is thus far running in a quite different lane.

Ant Financial, Pushes For The Wholesale License

While Grab, Singtel and the Razer consortium are all pushing for those full digital banking services licenses, Ant Financial is making a more moderate play and pushing for one of the more restricted wholesale licenses.

“In line with our commitment to promoting financial inclusion globally, we have submitted an application to the Monetary Authority of Singapore for a digital wholesale banking license,” a company spokesperson said in an emailed statement.“We look forward to contributing to the development of the digital banking landscape in Singapore.”

Ant brings more experience to this kind of digital license race than anyone else thus far — as it was one of the firms awarded one when Hong Kong distributed them last year. A group of Xiaomi related companies, Tencent and a group venture led by Standard Chartered PLC and BOC Hong Kong Holdings Ltd., were also awarded licenses. As Ant is China-based and has no Singaporean partner signed on to its bid, it can not compete for the full digital banking license.

As for what is next, MAS has officially confirmed that it cannot speak to any individual license applications thus far. And there will likely be more to come — most market watchers are still minimally waiting for an application from Oversea-Chinese Banking Corp.

Singapore officials have indicated winners will be announced in mid-2020.  Operations at the new digital banks are slated to start as early as 2021.

Who those players will be, remains to be seen, but we’ll keep you posted on this story as it develops.