One of Southeast Asia’s most prolific technology startups and the region’s largest telecommunications firm launched their digital banking joint venture in Singapore on Wednesday, becoming the first mover in a high-stakes battle for consumer finances.
Singapore-based superapp developer Grab and telco Singtel announced the rollout of the city-state’s newest virtual bank, named GXS, more than a year and a half after winning one of two full digital lending licenses awarded by the Asian financial hub.
Singaporean tech group Sea won the other license when they were handed out by the country’s central bank in late 2020 to raise the quality of the hub’s lending sector, but it has yet to publicly unveil its plans to compete in this space.
GXS, which is 60% owned by Grab and 40% by Singtel, will aim to amass customers by letting them “earn interest daily” through the bank’s mobile application which will be available from September 5. Incumbent lenders typically pay out such yields monthly.
“Our rates will remain competitive,” Charles Wong, CEO of GXS, told reporters at a launch event on Wednesday. “But I think what is important for us when we’re talking to our customers is that there are pain points beyond interest rates.”
Those “pain points” include such things as fees charged by traditional banks for failing to maintain a minimum balance. Because GXS is targeting so-called gig economy workers like Grab’s own food delivery force, as well as those just starting out in their careers, it will not require a minimum balance.
In the initial rollout of the bank’s services, customers will be allowed to keep up to SGD 5,000 (USD 3,570) in savings, which will draw a daily interest of 0.08% per annum.
Clients will also be able to create “savings pockets” within the GXS app to set aside funds for a goal, such as an upcoming holiday. These pockets will attract daily interest of 1.58% per annum, which Wong noted was comparable to time deposit rates at mainstream banks.
The CEO said that collectively, Grab and Singtel already have a local customer base of 3 million, which the new digital bank can tap to grow its clout. GXS, which will have no physical branches, plans to integrate some functions such as payments into the Grab superapp eventually.
Nasdaq-listed Grab has pursued a strategy of turning its superapp into a one-stop portal for customers. Full digital banking, however, will not yet be available on the platform.
Instead, customers will need to use the GXS app to access all of its features as the virtual lender gets off the ground.
Like its rival Sea, Grab has been burning through cash with the backing of investors to achieve exponential growth, but has come under increasing pressure to carve a path of profitability and reverse losses.
“It is overvalued compared to peers and seems to be lagging behind regional peers in superapp technological development,” analysts Samuel Tan and Kevin Tan of Malaysia’s Malayan Banking wrote about the Singapore unicorn in a report published on Tuesday.
“This does not detract from the prospects of the digital banking tie-up with Singapore,” both assessed. “Singtel’s financial backing gives confidence to customers that GXS bank will remain financially sound, given that Grab is loss-making.”