Singaporean gaming hardware company Razer plans to branch out into digital banking by tapping its extensive die-hard customer base, hoping to provide financial services for the underbanked millennials in Singapore and beyond.
Hong Kong-listed Razer (Hong Kong:1337), which has developed a loyal following among esports fans, offers gamers products and services ranging from high-performance gaming laptops to software, with its software platform being home to 80 million registered users worldwide.
“In emerging markets like Southeast Asia, the gamers are kids or people who have no credit card. They don’t even have a bank account,” Lee Li Meng, Razer’s chief strategy officer, told Nikkei. Such a situation, he said, is an opportunity to provide digital payment and other financial services to this demographic. Banking licenses would help the company to speed up this expansion.
A consortium led by Razer is one of 21 candidates applying for five new digital banking licenses from Singapore’s central bank. Up for grabs are two digital full banking licenses that can serve both retail and corporate customers and three wholesale licenses, in which the holders are not allowed to service retail clients. Razer is applying for the former.
If Razer gets the license, it could offer savings, loans and payment services. While the cost of entry into those businesses is prohibitive, Razer’s ready-made base of 80 million potential clients would help the company gain banking customers on day one without spending on advertising.
“The brand is already there. I don’t have to go there and build a brand,” Lee said.
According to Razer’s proposal, the company is set to establish the subsidiary Razer Youth Bank that will target millennials. Lee said the unit aspires to eventually expand to the Middle East and Western nations. “We are looking at building Singapore as the first country, but our ambitions are not going to be single country because it’s just not big enough.”
In 2018, the company established a fintech arm in response to in-game payment needs prominent in popular titles. That business is taking off: So-called e-wallet operations in Malaysia and Singapore have attracted 1 million users — mostly younger people. In countries such as Malaysia and Indonesia, Razer installed proprietary payment devices in retail outlets, allowing those without credit cards to pay for online purchases. Razer also offers credit card transaction processing services on contract. Those fintech operations have been profitable as well, Lee said.
Within six major Southeast Asian countries, only 104 million of the 400 million adults are fully banked. Even in Singapore, the region’s most advanced economy where nearly everybody has a bank account, 38% of consumers are not well served or have unmet needs, according to an estimate by the state investment company Temasek Holdings.
Southeast Asia’s digital financial services market revenue is forecast to be USD 38 billion in 2025 — more than triple the 2019 revenue, with digital lending being the fastest-growing segment. This makes pursuing a banking license a natural step for upstarts like Razer that are seeking new profit sources.
Another applicant to a Singapore digital banking license, Sea, an online gaming and retail platform based in the city-state, has grown to be one of Southeast Asia’s largest e-tailers, logging over 300 million orders in the third quarter of 2019 alone. If Sea, which is backed by China’s Tencent Holdings, enters the banking industry, it could extend financing to the small and midsized companies that list on the e-commerce portal.
Yet, their target customers — mainly the young — would not generate as much in fees per transaction due to smaller assets they hold compared with traditional banks’ customers. Success for new players will hinge on whether they can leverage their lack of branches and ATMs into a lean, efficient profit structure.
Singapore’s government has worked since June 2019 to open up its banking sector to players from other industries, seeing an early move in that direction as a potential advantage for the Asian financial hub. Companies outside the city-state — including Alibaba Group Holding affiliate Ant Financial and smartphone maker Xiaomi — have joined the race for digital banking licenses.
The government plans to decide in June which applicants will get the five licenses, with new services expected to launch by mid-2021.