Singtel, Grab to apply for Singapore digital bank licence

Singapore Telecommunications Ltd (Singtel) is partnering with Southeast Asian ride-hailing firm Grab Holdings Inc to apply for a digital full banking licence in Singapore, the two companies said on Monday.

The pair said in a joint statement they would establish a consortium with Grab owning 60 percent and Singtel holding the remainder, with the aim of offering a variety of digital banking services.

Singapore is embarking on the biggest liberalisation of its banking sector in two decades. As part of the move, it wants to enable online-only banks that can operate at lower costs and therefore offer different services than those of traditional lenders such as DBS Group Holdings Ltd and Oversea-Chinese Banking Corp Ltd (OCBC).

Singtel, the region’s largest telecom operator, and Grab are among the best-known names in Southeast Asia and both have been expanding outside their traditional businesses.

Singtel has been pushing into areas such as mobile wallets and online gaming, while Grab has expanded into food delivery and a range of financial services.

“The natural next step is to build a truly customer-centric digital bank that will deliver a variety of banking and financial services that are accessible, transparent and affordable,” Reuben Lai, senior managing director at Grab Financial Group, said in a statement.

Singapore’s central bank is set to issue up to two digital full bank and three wholesale bank licences. Digital full banks can accept deposits from and offer services to retail and non-retail customers but must be led by a Singapore-based company.

Wholesale banks will mostly serve small and mid-sized enterprises.

Southeast Asia’s digital lending market is expected to more than quadruple to $110bn by 2025, according to a report by Bain & Co, Google and Temasek Holdings Pte. Bids for the new virtual licences are due by the end of the year.

Several other groups have expressed interest in joining Singtel and Grab in applying, including billionaire Alibaba founder Jack Ma’s Ant Financial, gaming gear-maker Razer Inc. and OCBC.

Efforts to open up the Singapore banking industry to technology companies come on the heels of a similar move in Hong Kong, where Ant and Chinese competitors including Tencent Holdings Ltd obtained licences earlier this year.

For Grab, a digital banking business complements its growing suite of services built atop a ride-hailing platform that is expanding regionally. Its advantage over other non-bank companies is an existing share of online payments built up under the GrabPay brand from ride-sharing users and local merchants.

The startup, one of Southeast Asia’s most valuable, is expected to fold its financial operations into any eventual digital bank.

Grab doesn’t disclose the number of users – which include many for food delivery – but said its app has been downloaded onto more than 166 million mobile devices in Southeast Asia.

The company, which started out as a taxi booking app in Kuala Lumpur in 2012, has sought to forge closer ties to Singapore.

It has moved its base to the city and taken other steps to polish its local credentials. In March, it announced a new headquarters building in the city, and Chief Executive Officer Anthony Tan revealed plans to double local staff to 3,000.

Singtel has delved deeper into financial services as growth in its core telecoms business plateaus in an uncertain economy. The company swung to a net loss of 668 million Singapore dollars  ($495m) in the quarter that ended in September, due to an exceptional item related to Bharti Airtel Ltd.

The carrier has been offering its own mobile payments service in cooperation with regional associates, including in Thailand. Users can pay via its Dash app when travelling wherever Dash’s partners are located. The app can also be accessed through Apple Pay.

Digital banking is a natural extension of the company’s existing mobile financial services, said Arthur Lang, CEO of Singtel’s International Group. Its shares were largely unchanged on Monday.

“We want to fundamentally change the way consumers and enterprises bank,” he said.