Singapore's digital banking license battle: ant, xiaomi, tencent, toutiao and other 21, who can win?

Singapore's digital banking license battle: ant, xiaomi, tencent, toutiao and 21 others, who can win?
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Since January 2020, a group of leading fintech companies in China have accelerated their overseas market layout. Recently, xiaomi, ant, tencent and toutiao have announced that they have applied for digital banking licenses in Singapore. From the perspective of strategic planning, China's Internet giants' "going to sea" to obtain the financial license shows increasingly clear and complete results of the global layout, and delivers scientific and technological capabilities to more countries.

Xiaomi financial has announced it has applied for a digital banking licence in Singapore.On January 7, 2020, according to the millet group disclosed the news, it is financial group, new energy, millet and FundingSocieties (hereinafter generally referred to as the "LianGeFang") jointly announced the establishment of the sole strategic partnership, has been in December 31, 2019 to the monetary authority of Singapore (hereinafter referred to as the "Singapore's monetary authority") applied to digital wholesale Banks established Singapore (digital wholesale bank).

Ant financial, tencent and toutiao are all focused on digital banking licenses.Earlier, on January 2, 2020, ant financial said it had applied for a digital wholesale banking licence from the monetary authority of Singapore to promote global financial inclusion. Meanwhile, toutiao and Sea Limited, a southeast Asian e-commerce company invested by tencent, also said they would compete for the license to expand inclusive finance business opportunities in southeast Asia.

Malaysia, Philippines and other southeast Asian countries attach great importance to digital banking.Not only Singapore, but other countries in southeast Asia proposed to promote the construction of digital banking by the government and regulatory authorities in early 2020, introducing e-commerce platforms, communication service providers, ride-hailing agencies and even major consortiums to launch innovative digital banking services, so as to build a more diversified financial ecosystem.

In early January 2020, the website of the monetary authority of Singapore revealed that 21 applications for digital banking licences had been received as of December 31, 2019. Specific view, including seven full digital banking licence (digital full bank licences) application, 14 digital wholesale banking licence (digital wholesale bank license) licensing applications. Up to five digital banking licences will be issued out of 21 applicants as China's Internet giants scramble to grab the gold mine.



Southeast Asia is known as one of the most promising regions in the world, especially in the development of fintech. The market forecasts that the digital financial service revenue of southeast Asia is expected to exceed us $38 billion in 2025. After entering 2020, many Internet giants in China will accelerate their overseas market layout and further promote the development of consumer credit, small and micro finance and mobile payment business, so as to build a globalized and diversified innovation system of inclusive finance products.

I. 21 applications: why is there so much competition for digital banking licences?

The monetary authority of Singapore announced that 21 had applied for digital banking licences. In the bidding process, it has won the active participation of multi-industry giants, such as e-commerce companies, technology and telecom companies, fintech companies (such as crowdfunding platforms and payment service providers) and financial institutions. Which companies make up the 21 institutions? One zero think tank found through the official website of the monetary authority of Singapore that it did not disclose the specific list, but from the expressions of domestic fintech companies, it can judge their license application appeals and major participants.

(1) application for a licence

Fintech companies in China and local enterprises in Singapore are both competing for digital banking licenses, the core reason lies in that as an important base of fintech development in southeast Asia, Singapore has frequent economic and trade cooperation with China, which is a good opportunity for China to export technology and expand overseas customers. The launch of digital banking licences, Singapore's biggest liberalisation of the sector in two decades, has forward-looking international implications and will enable online Banks that can operate at lower cost and offer a different service from existing ones.

In late October 2019, Singapore's temasek holdings, Google and bain, an international management consultancy, released a report entitled "Digital its Promise -- The Future of Southeast Asia" s Digital Financial Services Industry. The report, which covers six markets in southeast Asia -- Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam -- said that "southeast Asia is one of the largest and fastest-growing regions in the world, and with the help of smartphones, will promote more consumers to use embedded financial services."

Figure 1: comparison of the development scale of digital economy services in southeast Asian countries in 2019 and 2025



Source: southeast Asia digital financial services report

The report points to a core set of figures -- by 2025, digital financial services in southeast Asia will generate about $38 billion a year, with the lending sector accounting for about half of that, driven mainly by consumer loans and sme working capital financing. Meanwhile, in terms of market size, digital payments in southeast Asia will exceed the $1 trillion mark by 2020, and digital lending, insurance and investment are growing at more than 20 percent a year.

Figure 2: the ratio of digital financial services revenue in southeast Asian countries in 2019 and 2025



Source: southeast Asia digital financial services report

(ii) main participants

While Singapore regulators did not disclose the names of the 21 applicants, some bidders said they had launched applications for digital banking licences. Therefore, the zero one think tank sorted out the following 10 main participants, including 7 digital wholesale Banks and 3 all-digital Banks, and most of them were led and promoted in the form of consortia for reference by other institutions. (more on the classification of digital banking licences in Singapore below)

The seven digital wholesale Banks are dominated by or participated in by mainland Chinese enterprises, including: first, ant financial; A consortium led by AMTD (xiaomi, Funding Societies and Singapore energy); Third, the consortium led by yifeng group (yilian group and haide group); Fourth, the consortium led by shengye capital (participated by Phillip capital and Advance.AI); Five is bytedance; Six is Beyond (V3 group, far east, SBF of Singapore chamber of commerce and industry, sumitomo mitsui insurance, EZLink and temasek's Helliconia Capital); Seventh, with the background of state-owned holding block chain, enlightenment block chain group and China siboan technology co., LTD jointly initiated the application.

The three all-digital Banks are dominated by local companies in Singapore, but also invested and controlled by Chinese companies, including Grab and Singtel (Grab accounts for 60% and Singtel accounts for 40%). Among them, didi is one of the investors of Grab. The second is a razer led consortium that includes skisong, FWD, LinkSure Global, Insignia Ventures Partners and Carro, of which razer accounts for 60 per cent. Third, Sea Limited, a southeast Asian e-commerce company invested by tencent, is the first single applicant to announce its application for such a license and is listed in New York.

It is worth noting that the consortium led by yifeng group (with the participation of eilian group and haide group), as one of the parties applying for digital banking license, has very strong shareholder strength. Of the two Chinese investors, one is eilian group, which is backed by eilian bank with a background of private Banks, while Meituan dianping, which is listed in Hong Kong, is the shareholder of eilian bank. The other is haide group, founded by cao tong, a former President of webank. Thus, Meituan and two private Banks (eilian bank and weizhong bank) are behind this license application agency.

Table 1: profiles of some companies applying for digital banking licences in Singapore



Source: public disclosure, zero one think tank

To sum up, the Chinese enterprises participating in the application for digital banking license in Singapore, including ant financial, tencent holdings, xiaomi finance, bytedance, didi, Meituan, yilian bank and webank, have significant technological strength. These Internet giants are trying to further expand the business map of inclusive finance by virtue of their resource endowment and linkage advantages at home and abroad.

(iii) state-owned blockchain enterprises enter the bureau

One think tank found that among the 10 applicants disclosed, one is a state-controlled blockchain technology company -- Beijing qigei blockchain technology development co., LTD. (hereinafter referred to as "qigei blockchain company"). According to qizhacha information query, qizhacha block chain company was founded in November 2018, with registered capital of 150 million yuan, and its business address is located in zhongguancun, haidian district, Beijing.

From the perspective of shareholding structure, its largest shareholder is enlightenment holding co., LTD. (hereinafter referred to as "enlightenment holding"), and one of its shareholders is Beijing state-owned assets management co., LTD., so it can be called a state-owned block chain technology enterprise. Because there are many foreign investment companies, it shows some foreign investment subjects.

Figure 3: equity structure of enlightenment blockchain company and its shareholders, enlightenment holdings



Source: qizhong

The block chain company applies for the digital banking license in Singapore this time, and will apply the block chain technology to the construction of "One Belt And One Road" with the advantage of state holding. Relative to other institutions of private subjects license application, enlightenment block chain company with unique technology and industrial advantages, using safety credible data exchange technology, establish a "silver" enterprise efficient collaboration platform, establish a "credit and financial" channel, in the service of government, enterprises, trade, finance, infrastructure, transportation, investment, and other areas of the application.

With the entry of the chinese-backed "national team", applying for a digital banking licence in Singapore will have a better chance of winning. The blockchain company has owned 31 technology patents and 10 software Copyrights. It has also conducted digital financial layout in the xiongan new area, chengdu and hainan free trade zone, and built a new service model in which data and algorithms work together to make decisions. It will help Singapore build a "financial highway" and accelerate the construction of "One Belt And One Road" in the future.

Ii. Digital banking supervision in Singapore: license classification, access conditions and consortium application process

According to the regulations related to digital banking licenses disclosed on the website of the monetary authority of Singapore, the local term is "digital banking license", which is divided into digital banking (DFB) license and digital wholesale banking (DWB) license. The classification was announced by the monetary authority of Singapore (mas) on June 28, 2019.

(a) development orientation of the two types of digital banking licences

Table 2: location of two types of digital banking licences required by the monetary authority of Singapore



Source: monetary authority of Singapore website, zero one think tank

(b) the eligibility criteria for applying for a digital banking licence

According to the mas, organisations applying for full digital banking (DFB) licences are now required to be controlled by Singaporean, singapore-based and anchored applicants. The disclosure of organisations applying for such licences shows that the majority are local companies.

Which make people not only think of, in the second half of 2019 Hong Kong disclose the number of licensed Banks, after zero one think tank in the latest! A licensed bank in Hong Kong rose to 164, 30 mainland Banks and other financial technology companies have layout, the article has pointed out that Hong Kong licensed Banks can be divided into two types of registered in the mainland and Hong Kong, and switch to "out" of Singapore, the applicant more cautious in other place, so will give preference to the fully digital banking licence granted to local enterprises in Singapore.

Regardless of which of the above two types of licences is applied for, the following conditions are required:

(1) at least one entity in the applicant group has a track record of three years or more in operating an existing business in the field of technology or e-commerce;

(2) suitable key persons;

(3) demonstrate the ability to meet the applicable minimum paid-up capital requirements at the outset and to continue to meet the minimum capital requirements;

(4) provide a clear value proposition that combines the use of innovative technologies to meet customer needs and cover underserved segments of the Singapore market;

(5) demonstrate that the proposed digital banking business model is sustainable;

(6) submit feasible plans to facilitate the orderly exit of the proposed digital bank;

(7) the shareholders of the proposed digital bank undertake to provide the statement of responsibility and undertaking that the hkma may require in connection with the operation of the proposed digital bank.

(3) assessment criteria for digital banking licences

The mas proposed that no more than five new digital banking licences would be issued, including a maximum of two DFB and three DWB licences. However, there are now as many as 21 applicants and competition is fierce. According to the progress, the application deadline is December 31, 2019, and the list of successful applicants will be announced in June 2020. It is expected to start business in mid-2021.

Which applicants can meet the admission requirements of the monetary authority of Singapore? According to the official, the development status of the applicant organization should be assessed in the following three aspects:

(1) the value proposition of the applicant's business model, combined with the use of innovative technologies to meet customer needs and cover underserved segments of the Singapore market that are different from existing Banks. The hkma will also consider the applicant's ability to implement the proposal.

(2) the ability to manage a prudent and sustainable digital banking business, including an understanding of the major risks of the banking business and the strength of its compliance and risk management plans. The mas will also consider the reputation of the applicant's shareholders, past performance, financial strength and commitment.

(3) growth prospects and other contributions to Singapore's financial centre, such as the jobs it will bring to Singapore, the commitment to develop the skills of the local workforce, the capabilities (including technology) to be established in Singapore, the headquarters functions to be established in Singapore to be fixed here and its regional expansion plans.

Three, new bank PK: from private Banks, virtual Banks, and then to digital Banks

In the face of the rapid development of fintech in the world, the banking industry in all countries is rapidly promoting the digital transformation and upgrading of the banking industry. From the private Banks approved by the Chinese mainland at the end of 2014, to the eight virtual Banks approved by Hong Kong in 2019, and to the beginning of 2020, the monetary authority of Singapore proposed to issue five digital banking licenses, constantly refreshing people's cognition of new Banks.

In addition, due to historical reasons, along with the development of Internet finance, China's banking industry has also appeared direct bank, Internet bank, open bank and other names. With so many names, which one represents the latest trend? Will digital banking lead innovation in the next few years? What exactly is digital banking, and what changes will it bring? Around these questions, zero one think tank read related concepts, the following from its definition, the mainland enterprises "to the sea" situation and other perspectives, trying to give a relatively reasonable answer for reference.

(I) the concept and connotation of digital bank

At present, the regulatory authorities have not put forward the definition of digital bank, which is a new type of business in the practice and exploration of digital transformation of the banking industry in various countries. Zero one think-tank, refer to the mainstream market, find Chris Skinner (messiah Skinner) released in the Digital Bank (Digital Bank) ", a relatively reasonable explanation, the book said: "the Digital key is different from traditional Bank, whether or not to set up branches, it no longer depends on the physical branches, but with Digital network, which is the core of the Bank, with the aid of cutting-edge technology to provide clients with online financial services, services tend to customization and interaction, and Bank structure tend to flat".

From this definition, digital bank has obvious characteristics of pure online and strong technology. Based on this concept, the direct selling bank, private bank and virtual bank formed today can be identified as the category of digital bank. At the same time, by comparing the practical results of digital banking in advanced countries in Europe and America and emerging countries in Asia, we find that the implementation of the two approaches is differentiated development:

On the one hand, the practice of digital banking in Europe and the United States started earlier, before the "first year of Internet finance" in 2013. Therefore, big data, cloud computing, artificial intelligence, block chain and other technologies at that time were not widely applied. At the beginning of exploring financial reform, Europe and the United States are more inclined to change the channel from offline to online, but less to explore new technologies.

On the other hand, emerging Asian countries, on the contrary, have accelerated the transformation and upgrading of their banking industry in recent years by making greater use of emerging technologies. With regard to the rapid popularization of Internet infrastructure and smart phones in recent years, a number of Internet companies have driven the development of inclusive finance with technology, and set up special financial licenses at the national level to promote the continuous innovation of digital banking service model.

To sum up, it can be seen that digital banking, an emerging industry, will become an important wind vane for global banking reform and innovation in the next few years. Previously, webank proposed in the digital summit of the final battle -- global digital bank report 2019 that, according to incomplete statistics, the layout of digital Banks in multiple locations around the world is as follows:

Figure 4: distribution of digital Banks by region (up to 2019)



Source: top of the digital game -- global digital banking report 2019

(ii) focusing on China: three companies applied for both virtual and digital Banks

Looking at the eight virtual Banks in Hong Kong and the 10 digital banking licence applicants in Singapore that it has been informed of, one think tank found that three Chinese companies were involved in two licence applications at the same time: ant financial, tencent holdings and xiaomi.

The above three are Internet companies, which are in a leading position among China's fintech companies. These institutions are accelerating their overseas layout and constantly optimizing and improving the digital financial service system. However, it cannot be ignored that whether the core resources scattered in multiple regions can really give play to the linkage advantage and export scientific and technological capabilities, so as to ensure that all branches can achieve profitability is a severe test in front of these Internet giants.

Table 3: background comparison of institutional shares between virtual bank and digital bank



Source: access to information, zero one think tank

(iii) Singapore is not alone: Malaysia and the Philippines have successively proposed digital Banks

Combing through the process of establishing digital banking licenses in various countries in the past two years, one think tank found that in addition to Singapore, Malaysia has also proposed to issue this license. On December 27, 2019, national Bank of Malaysia, Bank Negara Malaysia, Malaysia's central Bank) has released the Digital Bank Draft Licensing Framework "(Exposure Draft on Licensing Framework for Digital Banks), which pointed out that Malaysia's central Bank will first Digital banking licence issued by a maximum of 5 tickets, this is one of the important measures of the country to promote the financial innovation. Public disclosures suggest that Boost, Grab, TNG and BigPay are among those likely to be involved in Malaysia's application for a digital banking licence.

The Philippines has also proposed new initiatives to develop a digital bank. On January 6, 2019, the Philippine house of representatives ways and means committee, Joey Salceda said: "digital Banks to be more convenient, cheap, for the more traditional financial cannot cover the user community to provide financial services, is the important way to realize financial development of pratt &whitney. Just submit proposition 5913 if can pass, will provide the Philippines digital banking development effective unified central regulatory framework, provide consumers with multiple security deposit insurance, data security, etc.

The emergence of new bank forms is undoubtedly a strong competitor for many traditional commercial Banks. The approval of a digital banking licence in Singapore will change the competitive landscape long dominated by three local giants, including DBS, OCBC and UOB. After the issuance of the digital banking license, the traditional Banks will accelerate the speed of digital transformation and the business integration between them, thus forming a more open, intelligent and scenario-oriented financial ecosystem service circle.

Four, the conclusion

Since the beginning of 2020, the global banking industry has focused on digital banking, which poses a huge impact and challenge to traditional commercial Banks. After Singapore's central bank proposed to issue digital banking licenses in the second half of 2019, it instantly attracted many of China's Internet giants, and these leading fintech companies are gradually accelerating their "overseas" layout. So far, 21 companies have applied for licences, but the regulator says it will only approve five at most. Let's wait and see.

At the same time, Singapore's central bank has divided digital banking licenses into two categories, namely full digital banking and digital wholesale banking, stipulating that forward-looking innovative businesses must be owned by local companies as the main shareholders, in order to prevent and control financial risks. This model will also be copied by other countries. The joint participation of ant financial, xiaomi and tencent in the application for Singapore's digital banking license indicates that fintech will set off a bigger wave in the world.

Especially in southeast Asian countries, consumer groups have strong demand for inclusive finance, and they have close economic and trade relations with Chinese enterprises. Financial technology companies with experience in e-commerce platform and communication technology operation can give full play to their resource endowment advantages and realize cross-border business linkage.

Looking forward to the whole year of 2020, in the face of more and more Internet giants accelerating the distribution of banking licenses, the cooperation scope between traditional Banks and fintech innovators will be even broader in the future. With the help of technology enabling us to expand ecological partners, expand market scale and achieve "win-win" cooperation.

Text link:weixin.qq.com

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