Two Singapore-based companies, Grab Holdings Inc. (Grab) and Singapore Telecommunications Ltd. (Singtel), are in a partnership to bid for the city’s digital bank license. The bid for the digital license will close by the end of 2019. Many other companies including Google have also participated in this bid. Meanwhile, other financial investors are showing their interest in working with these two companies for this tender.
Existing Financial Service of Grab and Singtel
Grab, which started operating as a taxi service provider in Kuala Lumpur in 2012, provides software application ride-hailing transport services, food delivery, and payment solutions. As many as 166 million customers use the company’s mobile apps for food delivery in Southeast Asia alone. One of the key strongholds of the company is that it provides a facility to share online payments under the ‘GrabPay’ program to riders.
Grab had entered into a partnership with 60 financial organizations including United Overseas Bank Ltd. in Singapore and Malayan Banking Bhd. in Malaysia to expand its financial services across Southeast Asia. The Grab Financial Group was established in 2018 to provide digital payments services and personal loans to customers.
According to Bloomberg, “It also launched a numberless card with Mastercard and plans to start wealth management services next year.” As Grab’s CEO, Anthony Tan revealed in March 2019, a new headquarter for the digital service would be set up in the city and nearly 3,000 local staff would be recruited for the new office.
Singtel, one of the leading telecom operators in Singapore, which offers a diverse range of services including mobile, data, internet, TV, and digital solutions to customers worldwide. The telecom operator, established in 1992, has 59 offices across 22 countries in Asia Pacific, Europe, Middle East, and the Americas. Singtel’s plan for digital financial services is a new market strategy, as the company has been facing a slowdown of the telecom sector.
The company incurred a net loss of Singapore Dollar around 668 million ($490 million) in the quarter that ended in September 2019 due to several issues associated with Bharti Airtel Ltd., an Indian telecom company. Till November 2019, Singtel was the largest stakeholder of Airtel. It constituted a 35% share in the Indian telecom company.
It started offering mobile payment services associated with many regional associates, including in Thailand over the years. The CEO of Singtel’s International Group, Arthur Lang stated, “Digital banking is a natural extension of the company’s existing mobile financial services… since we want to fundamentally change the way consumers and enterprises bank.”
Partnership for Digital Bank Service in Singapore
Under the partnership agreement, Grab will hold a 60% share of the syndicate venture for bank licenses in Singapore and Singtel will own the remaining share. According to Bloomberg, “The consortium plans to set up a digital bank targeting so-called digital-first consumers, as well as small and medium enterprises that lack access to credit.”
The plan for the bank license was unveiled by the Monetary Authority of Singapore, as a part of the Singapore Government’s Expansion of financial service in the city. The government officials released, “The government is issuing five digital bank license; out of these, two will be full bank licenses and three wholesale licenses limited to serving corporate clients only– the first category requires capital of Singapore Dollar 1.5 billion ($1.1 billion), the second local dollar $100 million.”
Several other companies including Ant Financial, Razer Inc., and Oversea-Chinese Banking Corporation Ltd. have shown interest in working with the above-mentioned partnership to bid for the digital bank service deal. Following the news, the price of Singtel’s shares increased by 0.9% on Monday, December 30, 2019. According to a report by Bain & Co., “Southeast Asia’s digital lending market is expected to more than quadruple to $110 billion by 2025.” Several companies, including Google and Temasek Holdings Pte., have participated in the auction for the new virtual licenses of the Singapore city.
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