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Ant Group and Grab win Singapore digital banking licenses

E-commerce group Sea also obtains a permit in Asian financial hub

China's Ant Group, and a consortium comprising Grab and Singtel were granted digital banking licenses from Singapore's central bank. (Source photos by Ken Kobayashi and Reuters) 

SINGAPORE -- Chinese fintech giant Ant Group and a consortium including Grab and Singapore Telecommunications were among the four groups to receive digital banking licenses from Singapore's central bank, gaining a path to offering a variety of services as well as a boost to their fintech credentials. 

The other winners announced on Friday by the Monetary Authority of Singapore are the country's e-commerce and gaming group Sea and a consortium that includes China's Greenland Financial Holdings.

The central bank will issue full banking licenses to the Grab-Singtel consortium and Sea, and wholesale banking licenses -- which do not allow retail services -- to the other two parties.

Ravi Menon, managing director of the MAS, 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. They will further strengthen Singapore's financial sector for the digital economy of the future."

According to the central bank, the Grab-Singtel alliance -- at 60% and 40%, respectively -- and Sea were "clearly stronger" than the other full bank applicants.

As for the digital wholesale banks, the two applicants were "assessed to be demonstrably stronger across the criteria, notwithstanding the general high quality of the eligible applicants," the central bank said. "MAS will review whether to grant more [wholesale] licenses in the future," it added.

The winners are expected to start offering banking services in early 2022.

For Ant, the Singapore license means a fresh opportunity for its overseas expansion, a badly needed boost after it shelved last month what was to be the world's biggest initial public offering due to greater Chinese regulatory scrutiny. Singapore-based merchants that use Alipay could be potential customers for Ant’s digital-banking services.

MAS’ Menon previously said in a Bloomberg interview that regulatory tightening in China will not have an impact on digital banks in Singapore. Grab, whose core ride-hailing business was hit hard by the pandemic, is increasingly expanding its financial services. Grab’s partner Singtel also has a mobile-payment service in Singapore.

The Grab-Singtel alliance told reporters in an online briefing Friday evening that their bank will serve underbanked customers, such as young professionals, gig workers and micro, small and medium enterprises. They also revealed that they have hired a former Citigroup banker as CEO of the digital bank company that will employ 200 people at the start of services.

Reuben Lai, head of Grab’s financial arm, stressed that the consortium already has a large customer base through their existing services, so their customer-acquisition cost will be low, which enables them to become profitable early. “Unlike any other banks, we're leveraging on ecosystems that are extremely evolved,” he said.

The Grab-Singtel consortium will compete with Sea in the digital-bank space, as the city-state’s most valuable listed company will also target young people and SMEs. “[We] are honored to be selected by the [MAS] for the award of a digital full bank license and to have the opportunity to offer digital-banking services addressing the underserved financial needs of young consumers and SMEs in Singapore,” said Forrest Li, Sea chairman and group CEO.

The fourth winner is a consortium formed by Greenland group, Linklogis Hong Kong, and Beijing Co-operative Equity Investment Fund Management Co. Other applicants, including a consortium led by Singapore’s gaming-hardware maker Razer, and another group that included smartphone maker Xiaomi’s finance unit, lost in their bids. TikTok owner ByteDance was reportedly also one of the applicants.

The central bank last year announced the auction, drawing 21 applicants for up to five licenses. This past June, it said 14 of the 21 applicants had progressed to the next round of assessment, without revealing names.

The bidding attracted attention from local and overseas companies eager to gain a license in Singapore, known for its high regulatory standards.

The fintech realm of the digital economy was a hotbed of innovation well before the COVID-19 pandemic, which has only accelerated matters, giving impetus to service providers to expand their financial offerings from wealth management to lending to insurance.

The city-state's financial market is dominated by three major local banks, DBS Group Holdings, Oversea-Chinese Banking Corp. and United Overseas Bank. But the parties that battled for the licenses were looking to seize opportunities stemming from underserved customers such as small merchants and young people.

Moreover, the licenses, which come with the Singapore halo, have the potential to move the winners into better positions when other countries hold similar auctions. Already the central banks of Malaysia and the Philippines are planning to issue digital banking licenses to newcomers.

"Many ASEAN countries are watching Singapore's digital banking race with great interest," said Zennon Kapron, director of Singapore-based financial research company Kapronasia. "Any firm that can obtain a license in Singapore would likely have an easier time as they expand into other ASEAN markets."

Friday's announcement comes just ahead of the city-state hosting a weeklong virtual and physical fintech event beginning Monday that is expected to draw industry leaders. The new digital banking scheme will likely be a topic during the event.

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