Singapore’s first application for a virtual banking licence has come to an end, with five companies so far applying for them, including Mr Ma’s Ant Financial, underscoring his new ambitions. Unlike the full digital banking licence, Ant Financial applies for a “digital wholesale banking licence”, which does not allow savings deposits, but can Deposits received from current accounts. The required capital is only S$100 million, and foreign participants can apply.
As a new entrant in the digital banking sector, Ant Financial has comprehensive financial expertise. And it seems to be pursuing a cautious strategy.
After all, Alibaba’s Lazada, which is running online stores in Singapore and elsewhere in Southeast Asia, has enough payment options to support its business. Lazada has signed a joint-brand credit card agreement with Citigroup. Just three months ago, DBS and OCBC also offered installment plans to consumers who bought from Lazada.
Providing wealth management services to ordinary people, including financial advice generated by algorithms, may be a more profitable attempt. But for Mr Ma, the real bet is elsewhere, and it is a longer-term gamble that corporate cash management is the most promising and profitable area for digital disruption.
In this process, for example, according to McKinsey, banks in the Asia-Pacific region generate $85bn a year in fees for such transfers, two-thirds of which comes from transfers between businesses and individuals. If the Monetary Authority’s digital currency programme is successful, the clunky and expensive chain of agency banks will be bypassed. At that time, cross-border payments will be settled using cryptocurrencies and money will no longer get stuck somewhere in the middle.
Putting these digital currencies into businesses and institutions represents a greater opportunity than taking deposits or using analytics to make micro-loans to Millennials. By giving up the privilege of taking small deposits, Mr Ma only needs to use a fraction of the money that other challengers must put in. Even if Ant Financial’s rise in Singapore’s banking sector is still some time away, he is patient enough.