Singtel has added OCBC Bank as a mobile payments partner, enabling the bank’s customers to reduce their need for cash when visiting Thailand or Japan. But the telco’s e-wallet is only a stepping stone to its becoming a bank. Singtel and OCBC are expected to jointly apply for a virtual-banking license in Singapore (although Singtel might yet decide to seek a license independently). What might this look like?
OCBC is the second regional bank, after Thailand’s Kasikorn Bank, to join the telco’s mobile-payments platform, an app called Dash. Bank customers can use their own banking apps to make Singapore-dollar denominated, cashless payments with merchants in Singtel’s network, which it calls VIA.
Singapore’s digital infrastructure makes this possible, as Dash users can move money easily thanks to MyInfo (for data sharing), PayNow (for peer-to-peer funds transfer), a local standard for QR codes, and Singaporean banks’ early lead in developing open APIs.
As of the end of 2018, Singtel said it has over half a million Dash users, including Singapore residents, tourists, and – most importantly – foreign workers in Singapore. Such workers are often lower income people who are not well served by banks who join Dash to remit money home. Singtel is now gradually adding more financial services to Dash, such as very basic insurance packages from NTUC Income, says Valerie Law, an analyst writing on Smart Karma.
But Singtel is looking at a market for banking services 100 times bigger: the 50 million consumers and 2 million merchants in its VIA network across Singapore, Malaysia, Thailand, Indonesia and Japan.
In addition, the mobile payments industry in Southeast Asia is vast, driven by high adoption rates of smartphones. Singtel has partnered with Razer, an e-gaming company that is in talks to acquire MOL Global, a major e-payment network in Southeast Asia that is used by e-commerce giants like Lazada and Grab.
Valerie Law has identified a few strengths of Singtel as a virtual bank. (Be sure to check out her various reports on Smart Karma, which go deep into the details and also provide a good competitor landscape.)
First, while the license prohibits bank branches, Singtel nonetheless has lots of shops and kiosks around Singapore, where users go to top up airtime, among other things – an infrastructure that could be readily converted to topping up money or to pitch users financial products. Bundling telco and payments should help Singtel build a deposit base in short order.
Secondly, in Singapore, many merchants accept Dash, so there’s a ready network of players to accept payments and offer deals such as cash back, giving Dash the opportunity to evolve into a “lifestyle app”. Dash can also be used to pay for public transportation (unlike Grab). And it offers competitive foreign-exchange rates for local markets.
Law also noted the app has flaws, such as no customer support, not even a chatbot. And its remittance function only works with recipients on the network, which means no one can direct money back home to pay bills directly to a hospital, for example.
Indeed, Singtel would be going up against companies such as Grab, LINE and Alibaba that have well-developed user bases and advanced processes, such as credit scoring, which provide them with an edge – while also fighting lifestyle fintechs such as Revolut (which is more positioned for affluent users), TNG (a direct competitor for the foreign-worker segment) and Oriente (which is offering consumer loans via local consumer conglomerates in the Philippines and Indonesia). Throw in remittance players like InstaRem and Transferwise, plus incumbents such as Western Union, and the picture gets muddy indeed.
Singtel’s best weapon, as close to a “sure thing” that exists in business, is that demand for mobile and mobile services will grow. As a leading telco, this is a big advantage; with a virtual-banking license, it will be able to add on a growing number of payment, deposit, lending, insurance and investment products.
So within its network of merchants and partner banks, Singtel looks competitive. The question is whether it can develop its wallets and other services to be competitive in the broader market.