Following in Hong Kong’s footsteps, Singapore’s regulator — the Monetary Authority of Singapore (MAS) — has confirmed that it is currently studying the possibility of issuing digital-only banking licenses to organizations with a nonbank parentage, which was first reported on May 7, 2019 by various news outlets. What makes this news interesting is that it essentially confirmed the fact that the traditional monopoly in the highly concentrated banking market of Singapore is finally being shaken up. Without actual contenders, however, this news would be meaningless.
Enter Grab, a Singapore-based ride-hailing giant considered to be Southeast Asia’s most valuable startup with a billions-worth war chest, backed by Japan’s SoftBank Group Corp. Based on recent reports and anonymous commentaries, Grab is serious about applying for a digital-banking license, and here is why it makes a lot of sense:
- Grab has a customer base that can easily rival the big Singaporean banks. Forget about bank accounts opened at a branch. In over 50 years of existence, Singaporean banking giants DBS, OCBC, and UOB accumulated roughly 4–5 million individual customers. Grab launched in Singapore in October 2013 and has since been downloaded by 3.7 million users who, by the very nature of the solution, automatically maintain monetary balances in the form of a digital wallet (an electronic store of value), now with the ability to transact across a wide range of services and merchants.
- Grab could easily convert digital wallets into interest-bearing accounts. If permitted by the regulator, Grab can easily offer a competitive interest on customer balances maintained on their accounts, incentivizing customers to top up to higher amounts, thus drawing balances from the traditional banks. If allowed to accept direct deposits and wire transfers, Grab can effectively circumvent banks entirely as customers could direct their funds straight to the Grab bank app.
- Grab could easily start underwriting consumer loans as well as peer-to-peer loans. Naturally, a banking license will allow Grab to become a lending institution, and Grab can easily use its vast troves of customer transactions and purchase behaviors to implement its own risk-scoring model, instant credit approval, and fund disbursement — all in a matter of seconds. Moreover, leveraging its vast network of interconnected customers, Grab can begin facilitating peer-to-peer micro loans, similar to LendingClub.
- Grab could easily start allowing its customers to invest their money in stocks and mutual funds. Thanks to advances in robo-advisory technologies and white-label platform partners (such as another Singapore-based startup, Bambu), Grab will eventually allow its customers to begin micro-investing at low risk, with minimal initial balances and access to a wide range of investment products.
- Grab could easily enable fast, convenient, and near-free international transfers and remittances. Given Grab’s existing presence throughout Southeast Asia, it is not unfathomable that it can relatively easily launch and rapidly scale an online/mobile remittances business, starting out with basically any customers who have registered Grab accounts. Compliance with the anti-money-laundering laws should be easy and straightforward because the platform can support, update, and enforce requisite policies in a single place.
This list can go on, covering every possible revenue area shared by the traditional banks. But the bottom line is this: If someone like Grab actually goes for the digital banking license in Singapore, that could potentially create a serious wave, and banks that are unprepared to compete digitally would rue the day they ignored the calls for change — mostly coming from their own customers.