Ant Group Co. and a venture led by Grab Holdings Inc. won licenses to run digital banks in Singapore, paving the way for the technology giants to expand their financial services in the Southeast Asian hub.
Sea Ltd. is also among the four winners announced by the Monetary Authority of Singapore after almost a year of deliberation. A consortium involving China’s Greenland Financial Holdings Group Co. is the other successful candidate.
Singapore joins the U.K. and Hong Kong in opening up its banking system to purely digital entrants, as it seeks to inject innovation and competition into a market dominated by traditional lenders. The permits are coveted given the city’s status as a rapidly growing wealth management center and a gateway to Southeast Asia, where the digital lending market is expected to quadruple in five years.
“Following a very competitive digital banking license process in Hong Kong recently, digital banks in Singapore will now be one of the first to capitalize on the booming Southeast Asia market,” said Mark Robinson, technology sector lead partner for Asia Pacific at Herbert Smith Freehills in Singapore. “Other countries in the region will follow suit, including Malaysia, as financial services continue on the path to further liberalization and greater digitization.”
Digital full banks will be allowed to take deposits and provide banking services to both retail and corporate customers. Digital wholesale banks can only target small and medium-sized businesses and other non-consumer segments. They are expected to start operating from early 2022, MAS said.
“MAS applied a rigorous, merit-based process to select a strong slate of digital banks,” Managing Director Ravi Menon said in a statement. “We expect them to thrive alongside the incumbent banks and raise the industry’s bar in delivering quality financial services, particularly for currently underserved businesses and individuals.”
MAS, which had previously said it may grant as many as three wholesale licenses, said it will review whether to issue more in the future. The authority also said it had taken into consideration the impact of Covid-19 on the business plans and projections of applicants.
Fresh Competition
The entrants will provide fresh competition for lenders such as DBS Group Holdings Ltd. While more than 90% of Singapore’s adult population have bank accounts, the newcomers are likely to target segments including unsecured personal loans, as well as small and medium-sized firms that may not have good access to financing.
MAS was unswayed by Ant’s woes in its home market of of China after a series of regulatory clampdowns derailed its much anticipated initial share sale.
“What happened in China didn’t have much bearing on the decision we made on whom to give licenses,” MAS Chief FinTech Officer Sopnendu Mohanty said in a Bloomberg Television interview yesterday. The authority is focused on Ant’s potential to serve small and medium-sized businesses through “a truly digital transformation,” he said.
In a statement, Ant touted its “substantial experience and proven success” working with partner financial firms to serve SMEs. “We look forward to building stronger and deeper collaborations with all participants in the financial services industry in Singapore,” it said. Chanyaporn Chanjaroen & Yoolim Lee, Bloomberg
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