The ride-hailing company Grab has decided to get in to the business of digital banking and it has announced that it will be applying for a digital full bank license in Singapore in partnership with the country’s major telecommunication services providers, Singtel.
According to a joint statement of the companies, the new consortium that would be formed by the companies will consist of a 60 per cent stake for Grab and the rest 40 per cent for Singtel.
Grab and Singtel said that the digital-first users will be the major target group for them along with small and medium sized businesses that claim that they have stunted access to credits.
The startup Grab has ventured into a process of diversification of business even though ride hailing remains that core business for the company. A number of financial services throughout a number of markets in Southeast Asia such as insurance plans for its drivers, have been rolled out by the company after it had first launched its GrabPay e-wallet in 2016. The company also has a business interest in the highly competitive food delivery market of the region.
“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,” Reuben Lai, senior managing director at Grab Financial Group, said in a statement. The “natural next step” is to build a digital bank, Lai added.
This diversification of business is also one of the strategies for Singtel as the company has ventured into multiple businesses such as digital payments, with its Dash mobile wallet, and cybersecurity, in addition o continuing with its core business of mobile carrier services.
Up to five new digital bank licenses will be issued by the Singaporean government, the country’s financial regulator, the Monetary Authority of Singapore, said in June. That will include two digital full bank licenses that can be applied for by traditionally non-banking companies such as Grab and Singtel. The licenses will allow the companies to take in deposits from retail customers.
Issuing of up to three digital wholesale bank licenses for companies is also being planned to be done by MAS, which is also the country’s central bank. The bank said that those licenses will help to cater to the credit needs of small and medium-sized businesses as well as serve other non-retail segments.
It was accepting applications till the end of 2019, MAS had said in September. Customers could be benefitted be the presence of digital banks in terms of having more choices, believe analysts and industry watchers.
DBS Group, Oversea-Chinese Banking Corp, and United Overseas Bank are the three major banks that dominate the banking sector of Singapore. There are also a number for foreign banks in the market even though they have smaller scale of operations.
(Adapted from CNBC.com)