Temasek-backed firms, billionaires eye SEA digital lending via SG licence

A view of the Monetary Authority of Singapore building in Singapore April 18, 2016. REUTERS/Edgar Su/Files

At least three of the 21 contenders for Singapore’s first digital banking licenses share a common denominator: Temasek Holdings. 

The Beyond consortium led by local businessman Ron Sim’s V3 Group includes Heliconia Capital, a Temasek subsidiary. Sheng Ye Capital is also backed by Temasek, as well as the Grab-Singtel tie-up, of which Vertex Ventures, a venture capital unit of Temasek, is an early investor in the ride-hailing platform. Temasek itself is also a controlling shareholder of Singtel. 

Temasek is also a major shareholder in one bidder that pulled out.  The group comprising Validus Capital, which is backed by Vertex; Keppel Corp, which is being restructured as Temasek becomes a controlling shareholder; and local bank Oversea-Chinese Banking Corp. 

According to a Monetary Authority of Singapore statement, there were seven applications for digital full bank licences, which allows retail business, and 14 applications for digital wholesale bank licences. MAS did not name the applicants but noted most have formed consortiums. The regulator is to issue two digital full bank and three digital wholesale bank licences.

In its statement, MAS also noted that the bidders include e-commerce firms, tech and telco companies, and fintech players, as well as financial institutions. It said it will evaluate applications based on their value propositions, including the innovative use of technology to serve customer needs, their ability to “manage a prudent and sustainable digital banking business”, and contributions to Singapore’s financial centre.




Temasek targets investment themes including rising affluence in the region and emerging technologies, including AI. The strong presence of the state-owned investor comes amid stringent criteria and substantial capital outlay required – a minimum of S$15 million and a maximum of S$1.5 billion for a full banking licence – and as officials have expressed the city-state’s ambitions as an Asian banking hub.

While the successful bidders for the licenses are obliged to serve the so-called ‘underbanked’ in Singapore – the youth, and small-to-medium enterprises that lack access to financing – they would most certainly be using the licence as a stepping stone to regional expansion, observers say. 

“I don’t think that the Singapore market is what these digital banks are looking at. They’re starting here before going overseas,” says Andrea Chong, a banking analyst at CGS-CIMB. “They’re looking for validation from MAS before going abroad.” Chong also noted that government-linked contenders, such as Singtel, would be a confidence-booster for a consortium’s chances.

Singapore already has one of the highest rates of banking in Asia, with 98% of adults aged 25 and above owning one, according to Allianz Global Wealth. Indeed, the city-state’s three local banks – DBS Group, Oversea-Chinese Banking Corporation, and United Overseas Bank – are the three largest banks in Southeast Asia by assets, respectively.

Still, four in 10 of adults in Singapore remain “underbanked”, or do not have access to the full suite of financial services, such as credit cards or investment products, according to the digital economy report jointly produced by Google, Temasek Holdings and Bain & Co last year.

The report also noted that in Malaysia and Thailand, nearly half of the adult population is underbanked, while the unbanked – people who do not even have a bank account – were 15%, and 18% respectively. In Indonesia, half of the adult population is unbanked, while about a quarter is underbanked. In the Philippines and Vietnam, nearly 70% did not have a bank account at all. 

The five largest ASEAN economies – Singapore, Malaysia, Indonesia, the Philippines and Thailand – have agreed to liberalize the regional banking sector by this year. Under the ASEAN Banking Integration Framework, high-quality banks in association countries would be given access to other regional markets on the same footing as local banks. In 2017, Indonesia’s Bank Mandiri became the first bank to be granted the Qualified ASEAN Bank (QAB) status in Malaysia. At least two Malaysian banks are operating in Indonesia as QABs.

Thilan Wickramasinghe, a banking analyst at Maybank-Kim Eng, told DealStreetAsia that some of the parties in the consortiums vying for licences in Singapore already have a lot of data from their existing business models that give them an advantage. 

“That brings expertise,” he said. “The names and the depth of data they have should lower the cost of assessing risk and managing risk” and enable them to offer products, such as credit and insurance to the underserved.

Analysts have also noted that the digital banking groups would serve niche market segments that are either too high risk or low margin for the traditional banks. 

Southeast Asia’s digital lending market is forecast to grow from $23 billion in 2019 to $110 billion by 2025, according to the Google-Temasek-Bain report. However, as tempting as the opportunities afforded by a full digital banking licence are, wholesale digital banking services is where the real action is, and what bidders such as Ant Financial, backed by Jack Ma, and Singapore listed iFast Corp have set their sights on. 

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.