Ant Financial joins Razer, Grab in Singapore digital banking license race

China’s fintech giant Ant Financial has applied for a digital wholesale banking license in Singapore, joining the city-state’s digital banking race to create virtual lenders after gaming startup Razer and ride-hailing company Grab applied for full banking licenses in the same week.

MAS headquarters in central Singapore / Photo credit: Tech in Asia

“In line with our commitment to promoting financial inclusion globally, we have submitted an application to the Monetary Authority of Singapore (MAS) for a digital wholesale banking license,” an Ant Financial spokesperson told the South China Morning Post on Thursday. “We look forward to contributing to the development of the digital banking landscape in Singapore.”

Last June, the MAS unveiled plans to grant as many as five virtual bank licenses to boost competition and innovation. Requiring capital of S$1.5 billion (US$1.1 billion), two will be full bank licenses that will allow the applicant to provide a range of banking services to retail and non-retail customers. The other three will be wholesale licenses, requiring capital of S$100 million, allowing applicants to provide services to small and medium enterprises (SMEs) as well as other non-retail customer segments.

“Singapore is already a well-served market – although there is still scope for technology-led innovators to compete, especially in servicing SMEs,” said James Lloyd, Asia-Pacific financial technology lead for consulting firm EY. “A key question is how much technology can serve as a true differentiator in a relatively small market like Singapore – both in terms of reducing overheads and improving customer experience.”

Singapore’s move to open up its banking industry to technology companies comes after Hong Kong granted similar licenses to companies including Ant Financial and Tencent earlier last year.

Southeast Asia’s digital lending market is expected to grow from US$23 billion in 2019 to US$110 billion by 2025, representing a 29% compound annual growth rate, according to a report by Bain & Co, Google, and Temasek Holdings.

Razer teamed up with Sheng Shiong, the private unit of supermarket chain owners the Lim brothers, and FWD, the insurance business of Pacific Century Group, to apply for a full digital banking license on Thursday. The consortium is the second group to submit a license application, after Grab Holdings and Singapore Telecommunications announced their joint bid on Monday, in which Grab holds 60% equity.

If its application is approved, Razer Fintech, the company’s fintech unit, plans to build the world’s first global youth bank, Razer Youth Bank, to focus on serving youth and millennials. The company said in a statement that it will own a 60% majority stake while its strategic partners will take up the remaining equity interest.

“Addressing the unmet financial needs of the large, yet underserved, segment of the population through an innovative digital-first banking platform is a natural extension of our payments business,” Lee Li Meng, chief strategy officer of Razer and chief executive of Razer Fintech, said in a statement.

Bids for the virtual licenses were due by the end of 2019 and the MAS is set to announce the successful applicants by mid-2020.

Ant Financial is an affiliate of Alibaba Group Holding, which owns the Post.

Additional reporting by Tracy Qu