Why Sea’s solo, stealthy digital banking bid is a compelling one

With the string of consortium-led digital bank bids in Singapore, you’d think that more must be merrier. Internet company Sea, however, bucked the trend with its solo bid for one of the coveted full digital banking licenses in the city-state.

For a firm that has a track record of being low-key, its sudden announcement caught many off guard. But Sea has spent years stealthily laying the groundwork for this move. It’s obtained e-money licenses across Thailand, Vietnam, and Indonesia, for instance.

A solo bid has its advantages. In a marathon towards disrupting banking, a lone operator can adapt to changing consumer preferences faster than a large consortium. There are also more profits to be made across the entire spectrum of products, without having to share revenue with partners.

A solo bid shows confidence. As a local player, it doesn’t need a local partner to improve its odds.

If successful, US-listed Sea – which runs digital entertainment platform Garena, ecommerce marketplace Shopee, and digital financial services firm SeaMoney – will unlock a key to servicing small and medium enterprises and consumers in the city-state. It’ll also improve the perception of Sea as a Singapore-founded company with regional impact.

There’s a lot going in the firm’s favor. It has a track record of building multibillion-dollar businesses and high levels of corporate governance because of its listing in the US, where the Securities and Exchange Commission imposes stringent compliance rules. With a market value of more than S$25 billion (US$18.5 billion), the company has a strong capital position. As a listed firm, it can easily raise funds in the public market.

It has a huge – if unprofitable – ecommerce business that has been proven in China to be a jumping-off point for digital financial services.

Another striking advantage is its ability to run a hugely profitable gaming business. Garena generated more than US$450 million in adjusted revenue and about US$266 million in adjusted EBITDA in the third quarter of 2019.

Sea’s application comes as a surprise for a few reasons. Unlike lifestyle gaming company Razer, which has been vocal about its intentions in fintech, Sea has been relatively quiet on this front.

While Sea has been operating e-wallet AirPay since 2014, it’s only available to consumers in Indonesia, Vietnam, and Thailand. It will take time to make AirPay a household name in Singapore, where GrabPay and DBS Paylah dominate.

Beyond e-payments, Sea has been making headway in microlending. It recently launched Shopee PayLater in Indonesia, allowing customers to shop now and pay later via installments.

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