How Emtek’s recent buy can boost Grab’s digibank ambitions

When Indonesian media conglomerate Emtek announced its plan to acquire Bank Fama International by the end of this year, it didn’t mention Grab’s name at all. However, the partnership between the conglomerate and the ride-hailing giant means the deal may open a path for the latter’s digital bank ambition.

Grab’s entrance into the Indonesian market may be late compared to several competitors, but the fact that it’s a regional firm may be its core strength.

A customer using GrabPay at a store / Source: GrabPay

Grab’s interest in digital banking is obvious. It has partnered with Singapore telecommunications firm Singtel to acquire digital full bank licenses from the Monetary Authority of Singapore. The consorsium then also applied for a digital bank license from Malaysia’s central bank in July.

However, it’s a totally different regulatory landscape in Indonesia.

The country’s Financial Service Authority (OJK) has stated that it will not issue specific digital bank licenses in the archipelago. This means that every bank can be a digital bank as long as they have the capabilities set under Indonesian regulations. These banks can then choose to operate through a single main office or via limited branches to minimize costs.

However, these banks will need to obey the minimum core capital for general banks in the country, which is set at 2 trillion rupiah (around US$140 million) by the end of 2021 and 3 trillion rupiah (around US$210 million) by the end of 2022. These amounts are much lower than the minimum capital needed to create a new bank in Indonesia, which is 10 trillion rupiah (around US$700 million).

The regulations have opened the gate for tech companies such as GoTo Group, Sea Group, Akulaku, Line, and Kredivo to invest in existing banks, rather than build a new one.

Regionally focused digital bank

Talks of Grab’s digital bank in Indonesia grew louder when Tigor Siahaan, a seasoned banker in the country, resigned from his position as the chief executive of Bank CIMB Niaga. He is rumored to be the next head of a new digital bank backed by Grab and Emtek. Not long after Siahaan’s resignation, Emtek laid down its plan to acquire Bank Fama.

If the new bank materializes, it will differ from its local competitors in terms of its regional positioning. Grab has announced that it aims to launch a digital bank in Singapore by early 2022 and has appointed Charles Wong as the CEO of the new entity, where it plans to fill around 200 roles by the end of this year.

Similar to its other services, Grab’s digital bank offering in different Southeast Asian countries may be connected with one another. Besides Singapore and Indonesia, it will also launch a Malaysian digital bank if its application for a license is approved.

Japan’s Line has a similar angle, but its Southeast Asian users are still concentrated in Indonesia and Thailand, and its ecosystem is more limited compared to Grab.

Profitability is imminent