Standard Chartered bank is a big fish that is, however, poised to enter the market. According to two banking industry executives, the British multinational intends to pair with Singaporean insurance provider NTUC Income and is in the midst of hashing out structural details for the bid. Standard Chartered neither confirmed nor denied that it is bidding for a licence in its response to questions from The Ken.
Payment and fintech startups would seem as logical bidders, but that isn’t the case. Revolut, one of Europe’s billion-dollar-valued fintech startups, did not partake in the bid despite launching its digital service in Singapore at the end of 2019. Nium, a Singapore-based cross-border payments provider, quietly dropped out months after being the first to go public with its intention to bid.
Prajit Nanu, Nium’s co-founder and CEO, admits that wholesome advice from his investors, who urged him to focus on high-growth markets, ultimately won over his early urge to snag a licence. “We spliced and diced models in multiple ways, but couldn’t see a five-year path,” says Nanu. “Unless you sink significant capital, it is not clear how you can gain traction.”
There is, though, potential for the digital banking pie to grow via innovation and diversification, according to Varun Mittal, global emerging markets fintech leader at professional services firm Ernst & Young.
“Besides staple banking services, Singapore’s new digital banks will likely venture into fields such as transport, food and beverage, entertainment and travel. And this would drive the need for varied partners in forming consortiums to bid for a digital bank licence”
VARUN MITTAL, GLOBAL EMERGING MARKETS FINTECH LEADER, ERNST & YOUNG
That explains the core theory by the joint bid from Grab and Singtel—a relative power couple that mixes the $14-billion ride-hailing startup with a more old-school tech player, a telco. This union could, for example, see Grab offer its customers and drivers financial products based on their spending on its platforms. That’s without even including data from Singtel and its use of Grab’s customer information.
Razer—which partnered with the likes of venture capital firm Insignia Ventures Partners and auto listings startup Carro—could, by the same token, offer gamers loans to buy its latest hardware based on their brand loyalty, or car buyers loans based on their credit history.
Profit over growth
There are, however, valid questions about the viability of the consortia, especially their staying power to tackle a long-term business like banking. “Will some of these companies still be the same or even be around in five years?” the previously quoted financial markets analyst ponders.
Tied to that concern is the need for applicants to be profitable. MAS has been clear that this is key to winning a licence, reiterating that break-even means turning a profit. This is an issue multiple consortia must address since some have members that remain loss-making. For instance, Sea and Razer are yet to turn a profit since going public in 2017, while Grab remains on a pathway to profitability despite claiming some of its units no longer lose money.