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Singapore digital bank winners surge on hopes for fintech growth

Written by Nikkei Asia Published on 

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Shares in Singtel and Sea rise while banks drop after award of licenses.

Shares in Singapore Telecommunications and Sea surged after the two were named as winning digital banking licenses in the city-state, showing investors’ high expectation for their fintech businesses.

Singapore’s three traditional banks, meanwhile, dropped Monday morning, suggesting that market watchers think the newcomers could trigger meaningful competition with the incumbents.

The central bank, the Monetary Authority of Singapore, awarded digital full banking licenses on Friday to Sea, an e-commerce and gaming group, and to a consortium between Grab and Singtel. It also awarded digital wholesale banking licenses — which do not allow retail services — to Ant Group as well as a consortium that includes China’s Greenland Financial Holdings.

Singtel’s shares rose 11% at one point on Monday. Singtel, which already has its own mobile payment service, aims to boost its financial business through the joint venture, in which it has a 40% stake.

The Grab-Singtel joint venture plans to employ 200 people for the digital bank. The group said it had already hired a former Citigroup banker as CEO.

New York-listed Sea’s share price rose 8% Friday in the US market upon the Singapore announcement. One of the beneficiaries of the pandemic, Sea’s market value further rose to USD 98 billion, cementing its position as Southeast Asia’s most valuable listed company, far topping Singapore’s three old banks: DBS Group Holdings, Oversea-Chinese Banking Corp. and United Overseas Bank.

While the three banks dominate the market, the digital new rivals could capitalize on low-cost online-only operations to create financial services that would differentiate themselves from old banks. The newcomers may be able to reach out to more individuals and smaller businesses that were not a priority for traditional banks.

Moreover, the central bank on Friday hinted that it may consider granting more wholesale licenses in the future, which would potentially draw more competition.

Shares in DBS dropped more than 1% on Monday morning, while OCBC and UOB also saw their shares fall over 1% at one time in the morning — underperforming the benchmark Straits Times Index.

The incumbent banks showed confidence in their competitive position. “Our strong capital position and ‘phygital’ capabilities, which combine the best of digital services with physical touchpoints — the most of any bank in Singapore — further differentiates us,” DBS’ Singapore Country Head Shee Tse Koon said in a statement on Friday evening. “We believe that the new entrants will spur us all on to do better and we will continue to focus on making banking more intuitive and invisible so that our customers can live more and bank less.”

UOB’s CEO Wee Ee Cheong said that the new banks “will add to the healthy competition” and that the bank remains committed to investing in the capabilities that it has built.

According to the central bank, the new digital banks are expected to start services in early 2022.

This article first appeared on Nikkei Asia. It’s republished here as part of 36Kr’s ongoing partnership with Nikkei.

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