Singapore fintech: Digital wholesale banking arrives
06 Mar 2020

In June, Singapore’s regulator will hand licences to three new wholesale digital banks in a bid to better serve under-banked SMEs. Euromoney talks to Arival Bank, a fintech firm aiming to snag a licence and use it to fuel its global ambitions.

And so to the next stage of digital financial disruption. Last summer, the Monetary Authority of Singapore (MAS) said it would accept bids for five new virtual banking licences, with the winners to be announced around June 2020.

The MAS says it received 21 tenders and that the bids break down into two types. At least five bids have been lodged for full-service digital banks, to be whittled down to two by mid-year. Licensees have to stump up S$1.5 billion ($1.08 billion) in paid-up capital, must be based in Singapore and ultimately controlled by a local business interest.

Then there are the licences for new digital wholesale banks, coveted by at least nine companies and consortia. This is new and a further sign that disruption is moving beyond retail to the nuts and bolts of wholesale banking.

The applicants include some of the biggest names in fintech and in technology in general. Among those bidding for a wholesale licence are Chinese firms Ant Financial and TikTok, and Singaporean internet operators Sea and Razer. Several are consortia, bringing together Hong Kong financial group AMTD with Chinese smartphone maker Xiaomi, and telecoms operator Singtel with delivery firm Grab.

Some are firms few will know outside the world of fintech. Take Arival, founded in 2017 in Singapore with a stated mission to “bring a new level of banking service” to small and medium-sized enterprises. Euromoney met with its co-founder and COO Jeremy Berger in Miami, where he was overseeing a Puerto Rico-based team in the final throes of applying for a US digital bank licence.

Berger spends a lot of time in the air. Arival is also applying for a full digital banking licence in Lithuania, where Berger’s team is about to open an office in the capital Vilnius.

Other markets on the firm’s radar are Malaysia, the UK, Australia and the UAE, with Hong Kong and Taiwan also on its wish list. But it is Singapore that interests the young firm most.

Berger met his business partners, chief executive Vladislav Solodkiy and president Igor Pesin, both Russian nationals, at Money 20/20, an annual conference in Las Vegas about the future of payments and fintech.

Solodkiy, who cut his teeth in media and marketing at two of Russia’s largest lenders, Russian Standard Bank and Alfa Bank, before jumping into fintech, launched Arival in October 2017. Pesin and Berger joined a few months later.

Solodkiy’s CV is surely a sign of things to come as banking becomes more seamless and online. The leading providers of the future, Berger reckons, will be a melting pot of “industry experts, designers, artists, marketing gurus and young entrepreneurs”.

He says that as a rule, virtual lenders “prefer to hire young, hungry and driven individuals with a clear mind and the willingness to learn, adapt and innovate” rather than employing “old bankers”.

Singapore was the obvious place to locate Arival’s global operations, Berger says, pointing to its global outlook and willingness to welcome outsiders.

“It’s a startup paradise, with a lot of foreign-run fintechs, a supportive ecosystem and real fintech talent,” he says. “It’s full of ambitious digital firms looking for innovative digital financial services.”

The firm spent its early days helping corporates and mainstream lenders tackle compliance issues, including money laundering, and little else. But given its history – Arival sprung out of a $40 million venture capital firm called Life.Sreda, whose early fintech deals include a profitable investment in Russian neo-lender Rocketbank – its ambitions were always set on becoming a transnational digital bank.

Then came last year’s announcement by the MAS.

Singapore at the state level is a cautious operator, focused on pursuing accretive gains while keeping an eye on the bigger, long-term picture. The new wholesale licences fit into this framework. It involves risk, but it is contained.

Innovation is the aim, but it is kept caged until it is fully trusted. Successful applicants will be allowed to serve SMEs and other non-retail segments, and can only take fixed deposits of over S$250,000 from individuals.

By Elliot Wilson, Euromoney, 4 March 2020

Read more at Euromoney

RiskScreen: Eliminating Financial Crime with Smart Technology

Advance your CPD minutes for this content, by signing up and using the CPD Wallet