By Aradhana Aravindan and Anshuman Daga
SINGAPORE (Reuters) – Singapore Telecommunications Ltd (Singtel) <STEL.SI> is teaming up with Southeast Asian ride hailing firm Grab to bid for an online banking license in Singapore, the first such partnership that could spur a shake-up of the city state’s financial sector.
The companies said in a joint statement that they will form a partnership, with Grab owning 60% and Singtel holding the remainder to apply for a digital banking license to serve retail and small and medium enterprises.
The move comes as Singapore’s biggest liberalization of its banking sector in two decades seeks to enable digital banks that can operate at lower costs and therefore offer different services than traditional lenders such as DBS Group Holdings Ltd <DBSM.SI>.
But stiff criteria for digital licenses, including requiring S$1.5 billion ($1.1 billion) in paid-up capital for retail banks and local control, is making it necessary for potential bidders to team up.
Singtel, the region’s largest telecommunications firm, and Grab are among the best-known consumer names in Southeast Asia and both have been expanding outside their traditional businesses.
Singtel has been pushing into areas such as mobile payments and online gaming, while Grab has grown beyond its ride-hailing roots into food delivery and financial services.
“The natural next step is to build a truly customer-centric digital bank that will deliver a variety of banking and financial services that are accessible, transparent and affordable,” Reuben Lai, senior managing director at Grab Financial Group, said in a statement.
Sources have told Reuters they expect bidders to team up to combine banking know-how and consumer facing technology expertise and invest jointly.
Singapore’s central bank is set to issue up to two “digital full bank” licenses and three wholesale bank licenses. Digital full banks can accept deposits from and offer services to both retail and non-retail customers but must be led by a Singapore-based company.
Wholesale banks will mostly serve small and mid-sized enterprises.
The digital banking space is a natural extension of the mobile financial services that Singtel already offers, said Arthur Lang, CEO of Singtel’s International Group.
With stakes in telecoms companies worldwide, Singtel says it reaches more than 700 million mobile customers in 21 countries, while Grab says its app has been downloaded onto over 166 million mobile devices.
Singapore is set to announce the winners in mid-2020 and the digital banks are expected to start operations in a phased manner from mid-2021.
(Reporting by Aradhana Aravindan and Anshuman Daga in Singapore; Additional reporting by Rashmi Ashok in Bengaluru; Editing by Kim Coghill/Christopher Cushing/Susan Fenton)