Ant Financial applies for wholesale digital banking license in Singapore

Ant Financial Services Group has applied for a digital banking license in Singapore, as more Chinese technology powerhouses hasten their pace in expanding their digital offerings beyond the Chinese mainland.

The company said on Thursday it has submitted an application to the Monetary Authority of Singapore for a wholesale license, which would allow it to serve corporate clients.

"Ant has long been committed to the development of inclusive finance globally. We look forward to contributing to the development of digital banking in Singapore," a spokesperson said in an emailed statement.

MAS announced in June that it would offer up to two digital full bank licenses and three digital wholesale bank licenses in a bid to liberalize its banking sector, making it more "resilient, competitive and vibrant", according to its website.

Ant, the financial arm of Alibaba Group Holding Ltd, stands to benefit from the e-commerce giant's presence to support the development of Lazada, its newly acquired e-commerce counterpart in Southeast Asia, said Vey-Sern Ling, an analyst from Bloomberg Intelligence.

Gaming company Razer Inc also said it was leading a consortium that has applied for a license, while earlier this week Singapore Telecommunications Ltd and Southeast Asian ride hailing firm Grab said they were teaming up for a bid of their own.

Southeast Asia's digital lending market is expected to more than quadruple to $110 billion by 2025, according to a report by Bain, Google and Temasek Holdings.

Last year, Hong Kong offered digital banking licenses to companies including Alibaba, Tencent Holdings Ltd and Xiaomi Corp. Ant has been developing and fostering local digital wallet solutions in nine economies, the majority of which are in Southeast Asia, whereas Tencent is also heavily invested in supporting payment in local currencies in the region.

The likes of Alibaba, Ping An and Tencent are "increasing their investments as consumers from India to Japan to Malaysia turn to digital channels for retail purchases－both online and offline", said Jacob Dahl, a senior partner of consultancy McKinsey.

"These moves pose significant threats for incumbent banks, as these attackers have momentum in scaling innovative business models centered on data collection and the application of advanced analytics to identify new revenue opportunities and make smart lending decisions," he said.

As a result, incumbent banks like DBS have embarked on digital transformation inspired by platform players like Alibaba and Tencent, according to a McKinsey report on the importance of ecosystems. Over the past five years, DBS has invested S$1 billion ($741 million) annually in its transformation, resulting in a substantial increase in digital customers from 33 percent in 2015 to 48 percent in 2018.

IMF data showed that in 2017, roughly 39 percent of the adult population in low-and middle-income countries did not have a bank account, 55 percent of whom live in Asia. However, with an extremely high rate of mobile penetration over the past few years, this trend is improving, said Arunkumar Krishnakumar, a venture capital investor at Green Shores Capital.

"With technology firms joining the digital and financial inclusion wave, Asia (not just China) could be the new consumer fintech hub of the world," he said.