Carro joins Grab, Validus in race for digital banking licence in Singapore

A view of the Monetary Authority of Singapore building in Singapore April 18, 2016. Reuters.

Singapore-headquartered used car marketplace Carro is the latest firm to eye a digital banking licence in the city-state as it seeks to expand into financing for small and medium enterprises (SMEs).

“The digital bank license will allow us to create differentiated products and more importantly help serve underserved SMEs. We think that the incumbent banks are doing a great job serving the segments of the market but we are mostly interested in being a platform that enables the SMEs,” Carro co-founder and chief executive Aaron Tan told DealStreetAsia.

The development was first reported by Business Times.

The startup, which is backed by SoftBank Ventures Asia, EDBI and B Capital, currently offers loans and insurance services to car dealers and buyers through its wholly owned subsidiary Genie Financial Services. Genie claims to have underwritten loans worth over $200 million and facilitated more than 20,000 transactions in its two years of operations.

Tan said Carro is currently in talks with potential partners to apply for a wholesale digital banking licence. The Monetary Authority of Singapore, the city-state’s central bank, had in July announced that it plans to grant two digital full-bank licences and three digital wholesale banking licences. Applications are due by the end of December.

MAS requires companies applying for a digital wholesale banking licence to at least have a minimum S$100 million ($73.69 million) in paid-up capital.

“[Financial services] continues to be core to our business and in the long run (as it has proven historically), it will play a bigger and bigger role in the profitability of the company,” Tan said.

Several companies are vying for a digital banking licence in Singapore. GrabPay, the financial services arm of Southeast Asia’s ride-hailing giant Grab, is one of them.

“We are studying it very carefully and licences will only be issued […] I believe in May next year. So we will have to see what happens,” GrabPay managing director Reuben Lai told reporters on the sidelines of the Indonesian Banking Expo event in Jakarta on Wednesday.

Lai said the firm’s interest in digital banking was prompted by GrabPay’s mandate of enabling access to financial services for its consumers.

Aside from Grab, telco conglomerate Singapore Telecommunications (Singtel) and gaming hardware maker Razer Inc are also said to be interested in securing a digital banking licence. Peer-to-peer lending firm Validus Capital, meanwhile, is partnering Vertex Ventures, Oversea-Chinese Banking Corp, and Keppel Corp to pursue the licence, Bloomberg reported.

Meanwhile, Singapore-based cross-border payments startup Nium, formerly known as InstaReM, has become the first company to withdraw from the race to secure a digital banking licence.

“Singaporean banks are extremely well entrenched in that ecosystem,” Nium CEO Prajit Nanu told Bloomberg in an interview. The fintech startup is planning to focus more on its global business-to-business operations.