Five licenses drew 21 applications, and the giants entered Singapore.
Singapore’s digital banking license has recently become a “good heart” for many companies.
From Sea, the first Internet company in Southeast Asia to land on the New York Stock Exchange, Singapore’s native unicorn Grab, to Japanese insurance company Sumitomo Mitsui, to Chinese Internet giant Ant Financial, Byte Beat, Xiaomi Finance , And fintech company ADVANCE.AI, etc., have entered the wrestling field of digital banking license applications.
In 2000, the Monetary Authority of Singapore (hereinafter referred to as MAS) released the Internet Banking Framework, allowing local banks to try out the layout of Internet banking. After a lapse of 20 years, MAS has “opened the door” to the banking industry again. This traditional industry will usher in new players with diverse backgrounds such as the Internet, insurance, investment institutions, telecommunications, and retail.
The services that digital banks can provide are similar to traditional banks, including storage and loan lending, but all operations are completed online, there are no offline physical business outlets, and they are enabled by new technologies. , And virtual bank and other specific business manifestations. It is mainly targeted at retail customers, namely small and medium enterprises (SMEs) and individuals.
Because of its low opening cost and high flexibility, digital banking has become one of the pilot measures for financial innovation in many countries.
MAS issued an announcement last Tuesday that since the announcement of the opening of digital banking license applications in August last year, up to the deadline of December 31, 2019, a total of 21 applications have been received, including 7 digital full banking licenses. bank license) applications and 14 digital wholesale bank license applications.
Despite the large number of applicants, not everyone is available. Only 5 licenses were issued, including 2 full digital banking licenses and 3 wholesale digital banking licenses. The application results will be announced in June this year, and successful “delisters” can start business as early as mid-2021.
For the MAS move, Singapore-based fintech startup Silot CEO Andy said that Singapore ’s banking system business is quite complete. This time, issuing a license to a company without a banking background is more like a catfish effect. Attempting to use technology as a new force to further promote bank innovation.
Singapore ranks fourth among the top ten financial centers in the world, and only in Hong Kong. The banking industry is also a major driver of Singapore’s financial industry. According to Singapore accounting firm 3E Accounting,There are 117 foreign banks and local banks occupying an important position in the Bank of Singapore. The three major domestic banks, including DBS, OCBC, and UOB, account for most of the market share. .
In addition, Singapore ’s bank account penetration rate is already very high. Global Findex’s 2017 data show that Singapore’s population aged 15 and over has a bank account of more than 95%, which is slightly higher than Hong Kong and China’s 80%. This shows that Singapore’s banking retail business is already widespread enough.
This may explain why some companies actively chose to leave in this competition. Singapore startup Nium (formerly Instarem), whose main business is cross-border payments, withdrew its application for a wholesale banking license in November. Nium’s CEO once said in an interview that Singapore’s domestic banking system is actually deeply entrenched and well-established.
Since Singapore’s banking industry is perfect and developed, is the emergence of digital banking a “chicken rib”? Many companies that have already submitted applications have issued public statements one after another. The content of the statement is similar, claiming that if the delisting is successful, it will contribute to Singapore’s inclusive finance and make up for the current gap in banking services. Where is the gap in traditional banking services? The license application has already attracted various “fairy fights”. What kind of “rutile abacus” is everyone fighting?
What is the gold content of digital banking licenses?
The thresholds for applying for a comprehensive digital banking license and a wholesale digital banking license are quite different from the business that can be carried out after delisting.
The threshold for applying a comprehensive digital banking license is much higher than that of a wholesale digital bank. It has both restrictions on paid-in capital and company management requirements. For applicants with full banking licenses, the company’s minimum paid-up capital must be S $ 1.5 billion (US $ 1.08 billion), and MAS only considers Singapore as the core business, or the actual business controller is Singaporean, and the headquarters is Singapore Business. If a foreign company wants to apply for a full banking license, it needs to set up a joint venture with a local Singapore company, and the joint venture needs to meet the requirements of being headquartered in Singapore and having control over Singaporeans.
The application criteria for wholesale bank licenses are more lenient, as long as the company is registered in Singapore, and the minimum paid-up capital is S $ 1 billion.
At the level of business development, companies with full digital banking licenses can perform services on both the C-side and the B-side. However, wholesale digital banking licenses can only carry out business for the B-end.
The ADVANCE.AI CMO involved in the application for the wholesale digital banking license has stated in a previous statement that Small and medium-sized enterprises in Singapore often face problems in obtaining loans required for growing their businesses Certain difficulties.
Medium Small businesses are major customers in Singapore’s banking market. In 2011, Singapore adjusted its definition of SMEs. SMEs are companies with an annual turnover of no more than S $ 100 million (approximately USD 72.25 million) and no more than 200 employees. As the backbone of Singapore’s economy, SMEs account for 99% of its national enterprises, and GDP contribution accounts for nearly half of Singapore’s GDP.
However, according to 3E Accounting’s analysis, banks usually avoid lending to small and medium-sized enterprises that have not been audited or cannot provide collateral because of credit problems. For short-term loan business of small and medium-sized enterprises (generally no more than one year), banks generally do not involve it because of risk and cost considerations. In addition, the amount of loans obtained by SMEs in banks will also be lower than in lending platforms such as P2P.
This phenomenon is also one of the reasons for the entrepreneurial enthusiasm of the Fintech industry in Singapore. There are already more than 400 Fintech companies in Singapore. Findexable released a report showing that Singapore is ranked fourth among the Top 20 Global Fintech Hubs and the only Asian city to enter the Top 5.
Regardless of whether you have a full digital banking license or a wholesale digital banking license, you can serve B-side SMEs. Applicants are likely to see a business gap where it is difficult for SMEs to obtain loans.
Millennials (people born in the early 1980s to the late 1990s), which are becoming the backbone of society, are also the main target group for digital banking.
According to Oliver Wyman, a consulting firm, millennials in Asia value mobility, convenience, and digitization in terms of consumption. And they are full of current standard banking servicesThe intention is low, and there is a big gap between the expectations of banking services and the services that banks can provide. Therefore, how to improve services, carry out digital transformation, and meet the needs of young people has become one of the major changes for Asian retail banks.
Hong Kong has already tried digital banking. A year ago, the Hong Kong Monetary Authority (HKMA) opened applications for digital banking licenses, and among many competitors, only eight companies have finally obtained licenses. Ant Financial, Tencent, Xiaomi, JD.com, Ctrip, and Financial OneAccount and ZhongAn Insurance under Ping An Company are among the “delisters.”
China tried digital banking as early as four or five years ago. The front-runners are Internet companies with strong technical strength, including Weizhong Bank invested by Tencent, Zhejiang Netcom Bank with Ant Financial as shareholders, etc., which are typical of digital banking.
In addition, Japan and South Korea already have digital banks, and Taiwan issued its first digital banking license last year. Following Singapore, Malaysia also announced last month that it plans to issue five digital banking licenses in the future.
What is the meaning of “Fairy Fighting”?
In order to increase the probability of successful applications, most applicants have adopted the “group application” approach in an attempt to complement each other’s advantages and increase the probability of application. Grab teamed up with Singtel, one of the four major telecommunications companies in Singapore, and Razer, a Hong Kong-listed gaming company, led a number of companies to form a consortium. V3 Group, Asia’s largest luxury goods operator, led the Singapore public transport non-cash payment business Provider EZ-Link.
Due to the application threshold, companies from China have flocked to applications for wholesale digital banking licenses.
At present, there are no more details about the alliance parties of Ant Financial and Byte Beat application, but Xiaomi Financial Choice and AMTD Group, one of Asia’s largest investment banks, and Singapore’s crowdfunding platform Funding Societies, and the SP Group alliance of Singapore energy companies.
Chinese fintech companies Handy Technology (the founder of Handy Technology is the former president of Weizhong Bank Cao Tong) and Yealink Bank (the first private bank in Northeast China, Meituan Reviews is one of its main shareholders) Joined the iFAST group of Singapore wealth management company.
Both are Chinese fintech company ADVANCE. AI is teamed with Sheng Ye Capital (a supply chain financial services company listed on the Hong Kong Stock Exchange) and Singapore securities firm giant Phillip Capital .
The reason why applicants choose to hold a group is related to the assessment criteria of MAS. In the final selection of licenses, MAS has three considerations: whether it can provide technological innovation applications that meet customer needs, whether it has the ability to prudently manage and sustainably develop digital banking, and to develop Singapore as a financial center What you can do.
According to relevant industry sources, for Chinese companies, the last point is particularly important in the evaluation criteria. China’s innovation and technological capabilities have achieved sufficient results, and sincerity for development in Singapore has become a key factor to consider.
Strong alliances can indeed increase the probability of successfully obtaining a digital banking license. When selecting allies, all parties have their own considerations. According to relevant industry sources, Singapore-based unicorn ride-hailing company Grab and Singtel may be due to doubts about their own business models. The model of burning money by Internet car and the continuous loss of Uber and Didi makes Grab unable to provide effective endorsement for its sustainable development capabilities. Therefore, it needs to cooperate with Singtel, one of the four major telecommunications operators in Singapore. In addition, Grab continues to raise funds, and holding a license may help Grab tell a good story to win investors. The V3 Group has no strong technical background and has joined EZ-Link.
However, there are also drawbacks to “holding a group application.” In the real business development process after obtaining a license, there may be situations where the interests of all parties are difficult to coordinate.
SEA Group, the only Internet company listed in Southeast Asia, is one of the few companies that chose to fly solo during the application process. According to a public statement issued by the founder of SEA Group Forrest Li, a separate application for a license is based on a belief in one’s own strength. Sea’s gaming business Garena, e-commerce business Shopee, and digital financial business Sea MoneyHe has a strong technical background, an extensive user data base, and sound corporate governance as a result of his listing on the NYSE.
It is not difficult to find from the application list that most of the applicants participating in the competition have a layout of payment services. Grab has its own e-wallet Grab Pay in Singapore, and Singtel also has a corresponding mobile payment wallet Dash. Razer Pay, Razer’s payment service, is one of Malaysia’s important local e-wallets, and Singapore is the second market for which its main force has entered.
Holding a digital banking license will provide possibilities for financial wealth management services that can be derived from e-wallets, and the huge money-absorbing capacity it brings. China’s Alipay and WeChat Pay have given the best proof. .
The Chinese companies that have gone abroad to apply for digital banking licenses are also likely to have tasted the sweetness of testing the domestic digital banking business.
As one of the major shareholders, Ant Financial has established Zhejiang Online Commerce Bank in 2015. It mainly serves small and micro enterprises and self-employed individuals in China, provides operating loans, and earns profits within two years of establishment. The 2018 annual report shows that Zhejiang Netcom Bank’s net profit was 671 million yuan, a significant increase of 66.08% year-on-year. The number of SMEs served by online merchant banks has reached 12 million.
Xiaomi, in 2016, jointly established Sichuan Xinwang Bank with groups such as New Hope and Hongqi Chain. According to Sichuan Xinwang Bank’s annual report, the net profit in 2018 was 368 million yuan, which was profitable in one year, compared with a loss of 169 million yuan in the same period last year.
Tencent has the best performance in digital banking. Weizhong Bank, established by Tencent Investment, is China’s first Internet bank. Unlike Zhejiang Online Commerce Bank, Weizhong Bank mainly serves individual consumers and provides consumer credit services. In 2018, Weizhong Bank’s revenue has exceeded 10 billion yuan, with a net profit of 2.474 billion, a year-on-year increase of 70.85%, which is 3.69 times the net profit of the online merchant bank (670 million yuan) over the same period.
Tencent did not disclose information about applying for a digital banking license in Singapore. However, it can be seen that the considerable profitability has driven these companies to travel from the mainland to Hong Kong and to Singapore.
The role of digital banking license is long-term. MAS is also not in a hurry to fully implement the full digital banking license. It will take 3-5 years to make a smooth transition through supervision. Five digital banking licenses “who is lost”, see you in half a year.
文 | 李宇飞 @ 出海
Edit | 赵小 纯 @ 出海
Picture |Unplash, Pexels
