Grab, considered Southeast Asia's most valuable startup, is in discussions with Singapore banking regulators regarding a banking license for digital “online-only banks.”
According to various Singapore media reports, Grab is planning to hire a consulting company that will advise it on its banking potential and how it can apply for a digital-only bank license in Singapore, if the banking regulator decides to open up the “online-only banking sector.
The Monetary Authority of Singapore (MAS) said in May that that it was studying the potential for allowing "digital-only banks with non-bank parentage" into its market. This is seen as an important decision for Singapore so that it can expand its financial market as Hong Kong began doing earlier this year.
There have been other non-Singaporean companies, including Japan’s SoftBank Group who are said to be interested in the digital “online-only” banking sector and Singapore’s decision to allow non-banking companies to provide these online services is certain to shake up the Singapore banking sector which is dominated by local banks, DBS, OCBC and UOB.
It is expected that the MAS will make a decision within the next three months on whether it will allow these digital-only banks with non-bank parentage, and will determine the eligibility requirements for applicants. If the MAS agrees to issue online-only licenses, it is expected to limit initial participation to only a few companies and will only issue two to five licenses in an initial phase.
The interest from Grab underscores how Asia's non-banking firms are keen to challenge traditional banks by leveraging their technology and their user databases to offer banking services to retail customers and small businesses.
In 2018 Grab teamed up with Japan's Credit Saison to provide loans in Southeast Asia and securing a digital banking license in Singapore would allow the company to leverage its existing customer database and technology and to provide both online banking services and loans to its customers.
In addition to Grab, global FinTech companies as well as consumer companies with large customer databases are also expected to seek Singapore banking licenses, on their own, or through joint ventures with other entities.
Another company that will likely apply for a digital banking license is Singtel, Singapore’s largest mobile network operator in Singapore with 4.1 million subscribers. Singtel has already announced that it expanding its operations to include cyber security and mobile banking, so a digital banking license would be a natural product extension for the company.
A spokesperson for Singtel said that, "It is premature to comment but having ventured into mobile financial services, we are open to exploring the feasibility of such an opportunity should it arise."
Hong Kong has already begun issuing digital baking licenses and affiliates of Alibaba Group Holding and Xiaomi Corp, and a consortium led by Standard Chartered and BOC Hong Kong Holdings have already received their licenses.
Dan Jones, Partner at Capco Digital Consultancy said that, "In Hong Kong, the guidelines were quite precise in terms of what applicants had to prove in order to get a virtual banking license, more so than in Europe. It will be interesting to see whether MAS goes down a similar route to Hong Kong . . . so that the only people who can apply are established companies, rather than startups."