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NY-listed Sea speeds digital banking push with Indonesia acquisition

Fast-growing Singapore tech group's move heats up fintech fight in ASEAN

Sea owns e-commerce platform Shopee but is expanding into digital banking after having won a license to operate in Singapore.    © Reuters

SINGAPORE -- Singapore-based internet services group Sea has acquired majority control of small Indonesian lender Bank Kesejahteraan Ekonomi, Nikkei Asia has learned, a move that will accelerate the expansion of the company's online financial services in Southeast Asia.

According to company filings to Indonesian authorities, Turbo Cash, a Hong Kong-based Sea subsidiary, first acquired a 71.94% stake in Danadipa Artha Indonesia (DAI) in January last year and has gradually increased its holding in the company to 82.19% in November.

Meanwhile, Turbo Cash also took a 66.66% stake in Koin Investama Nusantara (KIN) in June. DAI holds 94.95% of Bank BKE, while KIN holds the remaining 5.05%, giving Sea indirect ownership of the bank.

Through Bank BKE, as it is better known, Sea will be able to provide online loans and other financial services in Indonesia, Southeast Asia's largest economy and one of the key markets for company's e-commerce platform Shopee. Sea will be able to capitalize on Bank BKE's existing individual and corporate customer network built through Shopee and its online gaming business.

Bank BKE is a relatively small bank, with total assets of 4.39 trillion rupiah ($310 million) at the end of 2019. Headquartered in Jakarta, it has eight branches in the country, according to the company's annual report.

Despite Bank BKE's small size, the acquisition gives Sea access to a licensed commercial bank and its resources. The deal is Sea's first acquisition of a bank and comes just after it won a digital banking license in Singapore. Sea is expected to start operating a digital bank in Singapore early next year. 

The company declined to comment on the acquisition. 

Listed in New York, Sea is Southeast Asia's most valuable listed company with a market cap of about $100 billion. It has been aggressively expanding as the COVID-19 pandemic accelerates digitalization in the region.

Backed by a profitable online gaming business, it has been splurging to grab market share in the e-commerce and finance sectors, two key pillars of the company. Sea has already rolled out financial businesses -- mainly e-payment platforms known as ShopeePay and AirPay -- in six countries in the region.

Yet, finance is still a relatively new business for the company. Over July to September 2020, Sea's finance unit reported a revenue of only $14 million and an operating loss of $151 million, reflecting its aggressive marketing expenditure to grow its finance business.

With the acquisition of BKE, Sea is entering the highly competitive digital financial services sector. 

In Indonesia, local ride-hailing unicorn Gojek acquired 22% of Bank Jago late last year to provide digital bank services on its app, while Singapore-based rival Grab invested in Indonesia's state-owned mobile payment service LinkAja. Grab is also a major shareholder of Indonesian e-payment operator OVO, which has a close relationship with Nobu Bank through their common shareholder Lippo Group.

Grab has also obtained a digital bank license in Singapore through a consortium with Singapore Telecommunications.

These operators see opportunity in digital finance as a significant portion of the region's consumers and small businesses are still underbanked. They aim to reach out to those customers through technology-enabled financial services.

Additional reporting by Ismi Damayanti in Jakarta.

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