IT WAS a hectic speed-dating process, but in the end, two old friends decided to commit.
Grab Holdings and Singtel on Monday made public their joint application for a digital full bank licence. Grab would hold a 60 per cent stake in the proposed consortium, with the telco giant holding 40 per cent.
Both partners see financial services as a natural extension of their core businesses, senior executives from Grab and Singtel said on Monday.
They have also been friendly partners: for example, in 2015, Singtel signed an agreement with Grab to promote the use of Singtel mobile wallet services on the Grab app to regional customers.
Reuben Lai, senior managing director, Grab Financial Group, told The Business Times that Grab is "very cognisant" that while consumers are comfortable with Grab as a ride-hailing firm, "putting money with us is a whole different matter".
"Having a brand name like Singtel (to have) that sense of trustworthiness was very important for us as well," he said in an joint interview on Monday.
Both firms would not be drawn into their regional ambitions for digital banking, saying it was "too early". But the new digital full bank in Singapore proposed by Grab and Singtel will shy from cash burn, while driving down the cost to target those deemed "underbanked" even in this mature market.
This proposed digital full bank from two of the biggest new names to step into the banking arena here is meant to be "sustainable", in line with the Singapore's regulator's objective of preventing any bank failure with its latest liberalisation move - even if the bank wears a new digital skin.
In the joint interview, Arthur Lang, CEO of Singtel's International Group, told BT that the high capital requirements, among other prescribed regulations, suggest that in Singapore, financial stability is "paramount".
"We cannot approach this as an entity where we're just going to burn cash and be loss-making for years," he noted.
"They (the regulators) want to make sure that the digital bank here is successful, and will become or has the potential of becoming a mainstream player. And that's the objective or the mindset that both of us are taking right now - we're here to make sure it's sustainable. It's not guns blazing... to grab market share."
Mr Lang added that Singapore remains a very well-banked market. "We're not going to kid ourselves that it's not," he said. "However, there are quite sizeable pockets of the customer base where we think we can make a difference."
He referred to a recent report issued by Bain & Company, Google, and Temasek, showing that four in 10 of adults living in Singapore were deemed unbanked or underbanked, despite Singapore being a matured financial market. Thirty-eight per cent of those polled said they were not well-served in financial services, as they fret over being underinsured, or having no long-term savings.
Grab had told BT in November that it is moving to tap the trillion-dollar wealth market across South-east Asia by offering low-cost investment products. Grab will, from the first half of next year, offer a handful of cash products - that is, money-market funds - here, with more complex products to follow.
It has also rolled out microinsurance products, with 70 per cent of its drivers in Malaysia already signing on to a usage-based insurance sold by Grab's partner Zhong An Insurance that offers per-day coverage for a daily payment.
Mr Lang, who also comes with years of experience in the investment banking sector, pointed to the demand for fractionalising of investment products, akin to how real estate investment trusts, or Reits, have been constructed such that investors can today own a piece of a building, or shopping mall. "Now we're taking it one level further."
Singtel - which expects to wield substantial influence even with a 40-per-cent stake in the consortium - also has a unique benefit it can bring to the table: it should be able to bring cybersecurity expertise via its cybersecurity unit to its banking business.
Singtel is Singapore's largest telco, though most of its earnings are derived from foreign countries. It has a customer base of more than 700 million across the region, including in the Philippines, Thailand, and Indonesia. Grab has a user base of 166 million across the region, and operates the dominant wallet in Singapore, Malaysia and Vietnam, Grab had told BT in November.
Grab has already rolled out loans to several SMEs (small and medium-sized enterprises) in Singapore alone via its joint venture with Japanese financial services group Credit Saison. The fintech had declined to disclose the size of its SME loan book in Singapore, or a target size for its SME financing business. In Singapore, half of its borrowers have been operating for five years or less, and about half were granted loans of no more than S$30,000. Six in 10 have an annual revenue of under S$1 million.
Grab had told BT in November that it would boost its SME financing from 2020, piloting this with "hundreds" of SMEs in the Philippines and Thailand, a large number of which are expected to be distributors of Fortune 500 retailers that have operations all across South-east Asia.