About three dozen firms including ride-hailer Grab, Standard Chartered (STAN.L) and Singapore Telecommunications (STEL.SI) are in talks to form consortiums that can meet tough entry norms to bid for Singapore’s digital bank licenses, sources said.
Singapore’s biggest liberalization of its banking sector in two decades seeks to enable online-only banks that can operate at lower costs and therefore offer different services than those of incumbents including DBS Group (DBSM.SI) and OCBC (OCBC.SI).
But some conditions are stiffer than in other markets such as Hong Kong, including requiring S$1.5 billion ($1.1 billion) in paid-up capital for retail banks and local control. This is necessitating bidders to team up to combine banking know-how, consumer facing technology expertise and deep pockets.
Many firms are locked in last-minute negotiations to meet the year-end deadline for bidding, said the sources who were not authorized to speak to the media.
“There is a lot of speed dating going on,” said Varun Mittal, who heads the emerging markets fintech business at consultancy EY.
Singapore’s central bank will issue up to two retail and three wholesale bank licenses. Retail banks can accept deposits from and offer services to both retail and non-retail customers but must be led by a Singapore-based company. Wholesale banks will mostly serve small and medium enterprises (SMEs).
“Even today, SMEs have great difficulty getting working capital finances because the kinds of credit evaluation and collateral that need to be committed don’t work for them, but for bigger corporations,” said Shailesh Naik, CEO of fintech firm MatchMove, which is exploring joining a consortium.
Grab, Singtel and Standard Chartered confirmed their interest in a license but declined to specify details.
Sources said Chinese insurer Ping An (601318.SS), a consortium including Singapore tycoon Ron Sim’s holding company V3, and others such as insurer Great Eastern (GELA.SI) are also interested. The companies declined to comment.
Divyesh Vithlani, who leads Accenture’s financial services practice in ASEAN, said some applicants were teaming up to provide SMEs with accounting, payroll or insurance services as well as banking.
Some contenders hope their wide-ranging customer data combined with new technology and nimble operations will help them win customers in a Singapore banking market that has over 150 deposit-taking institutions, with total assets of about $2 trillion.
For companies with regional aspirations such as Grab and Ant, a Singapore banking license could offer a stepping stone to expanding in larger Southeast Asian markets as the region embraces an era of digital banks.
“The play needs to consider not only the local for local game but also the bigger prize that’s out there around the cross-border activities,” said Mohit Mehrotra, head of Deloitte’s strategy practice in Asia Pacific.
Singapore’s initiative follows moves elsewhere including in Hong Kong, which issued eight online-only banking licenses, four to consortiums.
The city-state is set to announce the winners in mid-2020 and the digital banks are expected to start operations in a phased manner from mid-2021.
Reuters | SINGAPORE