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Five takeaways from Singapore’s VB picks

What does the selection of these four applicants for a virtual banking license tell us?

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On Friday, December 4, the Monetary Authority of Singapore announced it had handed out four virtual-banking licenses, two for retail (or full banking licenses) and two for wholesale-business only.

The retail licenses went to a Grab-Singtel partnership and to Sea Group. Although three wholesale licenses were in play, MAS only handed out two, to Ant Group and to a consortium led by Chinese developer Greenland Holdings.

DigFin wrote back in January that the biggest question was selecting bids that had a clear path to financial sustainability. The outcome suggests MAS did indeed make this a priority.

1. Fintech means go big or go home

A full banking license in Singapore ultimately requires S$1.5 billion in capital, and even a wholesale one requires up front S$100 million. On top of this, Singapore is a very well banked market, with its three domestic banks quite sophisticated in digital services.

Grab and Singtel already have a significant customer base, both in Singapore and overseas. They have brand power. Grab Financial’s acquisition of robo-advisory Bento earlier this year now looks even more important as a means to deliver wealth management on top of banking.

Sea Group operates Shopee, the fastest-growing e-commerce company in the region, as well as gaming business Ganera, wrapped together with SeaMoney, its wallet.

This combination edged out the proposed Razer Youth Bank with an overall more cohesive and streamlined bid. Razer, also a gaming company, had made one of the more creative pitches, cobbling together more than two dozen partners. But its focus on youthful gamers looks to have been judged too limiting in the face of a huge battle to make its bank profitable.

2. It’s a big win for Chinese tech

Three of the four winners are Chinese (if you include Tencent’s 34% stake in Sea).

Varun Mittal, partner at EY in Singapore who helped shepherd through some of these mandates, says it’s a mistake to view the winners through a nationalist lens. He notes that a week ago, Singapore had 99 wholesale banks – all foreign – and now it has 101, and everyone uses the same digital infrastructure for payments, KYC, and capital.



Perhaps what this does say, though, is that Chinese fintech has proven itself internationally. Although Hong Kong’s virtual banks are dominated by mainland tech companies, that’s no surprise given Hong Kong’s status as part of the People’s Republic.

The win also gives Ant a consolation prize for 2020 after the trauma of its failed attempt to IPO in November. Whatever its tussles with authorities in Beijing, it’s still business as usual for this most unusual of fintech companies.

In terms of validating Chinese tech models, this win may have saved Grab’s bid to become a true superapp, in the mould of an Alibaba or Tencent. To be sure, the company has already built Grab Financial for payments, lending, insurance, and asset management. But Grab continues to lose money in its core business of ride hailing, and without the banking license it would struggle to monetize its consumer base. Now the path is clear – so this is, in its way, also a victory for the China tech model.

3. Wholesale isn’t a fashion show

Awarding a license to Ant, which has a strong track record in serving small businesses and entrepreneurs, looks straightforward. Ant is also famous. But MAS made clear that wholesale banking is not a popularity contest.

Greenland is not well known in fintech circles but it is ranked 176 in the Fortune Global 500 rankings. Based in Shanghai, this real-estate company reported over $2 billion in profits last year, on revenues of $62 billion. It and its VB partners have experience in real-estate and supply-chain finance, and its proposal is said to have emphasized green finance and sustainable development – themes we’ll surely here about this week during the Singapore Fintech Festival.

4. This is not the end of the story

We could see yet more players enter digital banking in Singapore.

First, the MAS held out the possibility of awarding more wholesale licenses once it saw how the first batch performed.

Some bids that fell short include the Xiaomi-AMTD consortium. This is a surprise, given their experience having launched Airstar Bank in Hong Kong, Xiaomi’s strong tech credentials, and its having avoided getting tripped up by political tensions between China and the U.S. (These tensions could have impacted VB bids by the likes of Bytedance.)



There were also some homegrown players that put in bids, such as a consortium called Beyond, as well as some plays by tech companies.

Only the MAS knows whether these also-rans can regroup and clear the high bar later – or if MAS has made up its mind and will be looking for something different.

But a different route exists for a select few banks, be they Singapore’s homegrown lenders or those foreign banks deemed a “Singapore rooted” entity by MAS. This includes Standard Chartered Bank, which has backed the launch of Mox Bank in Hong Kong. It is well positioned to apply for a separate license as an internet bank in a joint venture with a tech partner.

5. It’s time to innovate

For 2021, though, the action will now focus on the innovation that these four virtual banks can bring to Singapore, how they operate cross-border, and how they cement Singapore’s position as one of the world’s most important centers of digital finance.

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Five takeaways from Singapore’s VB picks