Singtel, one of Singapore’s largest telecommunications companies, is now progressing with its initiative to launch a digital bank with the help of the Grab, a multinational ride-hailing service provider.
Sachin Mittal, analyst at Singapore’s DBS Bank, said that the joint initiative seems like “a strong candidate for a full digital banking license.”
Singapore’s reserve bank and financial regulator, the Monetary Authority of Singapore (MAS) is reportedly planning to award two full-service banking licenses to consumer digital banking platforms.
Singtel might have to set aside more than S$600 million (appr. $400 million) for the digital bank project in the long-term. At present, Grab has a majority or 60% stake in the joint project.
The digital bank initiative has appointed Charles Wong to serve as the bank’s managing director. Wong reportedly has around 20 years of experience in the banking sector. He previously worked at Citi as its head of retail banking in Singapore.
If the companies manage to acquire a full banking license, then the new digital bank could potentially capture up to 4% of Singapore’s market share (of the banking sector) within the next couple of years.
The Singtel-Grab joint project could bring two major businesses closer together to offer a wide range of services. Both Singapore-based companies can leverage their large regional customer base to further expand their operations.
Singtel (short for Singapore Telecommunications) claims more than 4.3 million mobile phone subscribers. Meanwhile, Grab reportedly has 187+ million users.
Temasek Holdings, a state-owned investment firm, is a majority owner of Singtel. Grab is backed by investments from SoftBank.
Although both companies have reported strong financial results in the past few years, their revenues fell considerably following the COVID-19 outbreak. Singtel’s management reported in June 2020 that Singapore’s nationwide lockdown measures led to a considerable decline in its mobile service revenues.
As confirmed by Light Reading, Singtel’s operating revenue at its Singapore consumer branch reportedly dropped by over 20% year-over-year to around S$406 million (appr. $298.5 million) for the 3 months ending June 30, 2020.
Meanwhile, Grab was forced to lay off 360 workers in June of this year (due to movement restrictions following lockdowns that affected its business).
As reported in December 2019, Grab had said that it would work with Singtel to acquire a digital full bank license in Singapore.
Although ride-hailing is Grab’s primary business and one of its major sources of revenue, the firm also introduced its GrabPay electronic wallet in 2016. The startup offers several different financial services in the Southeast Asia region, which include insurance packages for its drivers. The company has also established its presence in Asia’s competitive food delivery industry.
Reuben Lai, senior managing director at Grab Financial Group, had stated (last year):
“In the past two years, we have launched and scaled financial services such as e-money, lending and insurance distribution into Southeast Asia’s largest fintech ecosystem.”
Lai had also mentioned that the “natural next step” for the company is to launch a digital-only bank.