It’s 2022, and this is the year where Singapore’s digital banks are set to showcase their offerings.
Grab-Singtel consortium, known as GXS Bank, is one of two awardees of full digital bank licences granted by the country’s central bank. The other full digital bank licence was awarded to tech giant Sea. A digital full bank can serve both retail and corporate customers.
Last year, the digibank laid the groundwork, taking up mass hirings and capital injections – it recruited around 200 new staff. The hiring momentum has not stopped yet as a check online showed that it’s still open for roles like Senior Data Scientist, and Digital Customer Engagement Executives.
In a jobs advertisement, the digibank referred to Grab as the leading technology firm in Southeast Asia offering everyday services to the masses while Singtel is coined as Asia’s leading communications group connecting millions of enterprises to essential digital services.
The digital bank is regarded as a natural extension of Grab Financial Group as well as the mobile financial business of Singtel, and both have the ambition to enable consumers to have wider access to financial services.
Grab has a 60 per cent stake in the digibank consortium entity while Singtel holds a 40 per cent stake. Both parties are expected to tap on their existing ecosystems of millions of customers to test out their financial products.
Charles Wong, the CEO for the new Grab-Singtel digibank, had previously said that customers from multiple segments, including the underserved and underbanked, will be able to have their financial needs met seamlessly, “powered by our next-generation cloud technology and data platform”.
Currently, Grab offers financial products like buy now, pay later (BNPL) service GrabPay Later and micro investment service AutoInvest. It also dabbles in the crypto space – having partnered with merchants to allow the purchasing of digital assets via GrabPay.
There hasn’t been an official announcement on the digibank’s suite of offerings yet, although the bank was expected to start business from early 2022.
As the expected launch draws closer, we take a look at the existing products and services Grab is offering to get a preview of what’s to come and suggest some possible products it might launch as a full digibank.
But first, understanding the underserved
Singapore’s consumers are ripe for the picking. A McKinsey survey in September last year found that over 70 per cent of Singapore consumers are open to migrating to digital-first banks.
In 2020, in a media release on its digital bank, Grab and Singtel had said that the consortium will focus on serving consumers and small businesses, starting with time-starved young professional, managerial, executive, and technical (PMETs) workers, gig workers with flexible incomes, and micro-SMEs who face limited access to financing.
Unbanked and underbanked consumers and small businesses will be the ones who will benefit most from these digibanks, and they can look forward to more micro products and services to be delivered on a single platform.
These may include individuals or companies that may not qualify for certain products or services at traditional banks. For example, to qualify for a credit card, individuals have to hit a certain annual income. Many gig workers who have flexible incomes find themselves excluded from such services.
Product and services offerings 1: Savings accounts
A Grab spokesperson told the media in January that its new digital bank will provide customers with core banking services such as savings as well as other products like loans and wealth management.
Currently, Grab doesn’t offer savings and deposits services. For digital banks, all banking services will be done online. There will not be any retail presence such as physical bank branches.
To not have a retail presence helps the digibank to save money on renting spaces to serve as branches. The lower overhead costs could allow the digibank to free up finances to offer higher interest rates to reel in consumers. Customers who are tech-savvy and can bank online fully will not mind a digibank.
It is likely that the Grab-Singtel digibank will offer deposit account openings without a minimum amount or a low minimum threshold. It may also adopt a different credit risk assessment method to qualify the users. For example, tech giant Alibaba’s Alipay tracks the consumer’s creditworthiness through their purchase history and ability to pay in full.
With GXS, customers can access banking services 24/7, and likely be recommended products and services via artificial intelligence insights – similar features that traditional banks have been offering.
Product and services offerings 2: Limited spending credit cards, BNPL
Grab Financial has been ramping up its financial services capabilities over the years. Products include its GrabPay card and BNPL service.
The GrabPay card is a prepaid debit card offered by Grab and Mastercard. It allows users to pay at any physical or online shop that accepts Mastercard, and contactless payments can be made.
It’s free to activate the digital card and customers may request a physical card with a S$10 refundable deposit. The GrabPay card can also double up as an EZ-Link card to pay for public transportation rides.
For payments to work, customers will have to link up a bank account or bank card to withdraw from. They get to earn reward points per transaction, which can be used to redeem food and services from merchants and Grab.
There is a likelihood that the digibank might offer limited spending credit cards to customers who have or will transact higher volumes with them, like SMEs and high spenders. As the digibank is new, the interest rates might be lower to draw customers in.
Actually, Grab already has a payment service that’s similar to a credit card function in action – its PayLater service offered to frequent users. For example, as a frequent user of Grab for many years, I have S$3,500 credit to use on my GrabPay card. The drawback is that I can only use PayLater for services that are offered by Grab or in partnership with Grab.
This means that I can use PayLater to purchase food on GrabFood, shop on GrabMart, and book car rides on the Grab app. The company was able to issue me such credit based on my transaction history and spending power, on top of my already verified account. The bill is due every month and is sent via email, and payment is made on the app.
Grab’s BNPL service is tied to this credit account. Customers like myself can tap on PayLater for retail and online merchants that accept this service and the payment for the goods will be paid through a four-month installment plan.
Product and services offerings 3: Investments and wealth management
A banking journey should extend beyond just deposits and payment services. As customers grow wealthier in life they will need to find a way to make their money work for them via investments and wealth management solutions.
Currently, Grab offers micro-investment service AutoInvest, which allows customers to invest as little as S$1 each time they use Grab to pay for something. The monies are invested in funds managed by asset managers.
Grab might expand on this investment service when customers’ investment portfolios reach larger amounts. Potentially, asset managers or robo advisors may be relied on to manage the larger funds. Robo advisors are digital solutions that provide automated, algorithmic investment services with minimal human supervision.
Traditional banks are also offering trading services that extend towards equities, bonds, Forex, and even crypto. In the long term, a more sophisticated GXS Bank would likely see the offering of such services as well.
For now, Grab has extended its payment services to allow consumers to buy crypto from verified crypto service providers like Coinhako. Although the flat service fee of 2.5 per cent does put off some customers who rather do bank transfers and pay lower transaction fees, it’s a step Grab has taken towards integrating its services into the crypto asset space.
Future offerings could also include crypto wallet services, that’s if the adoption of cryptocurrency reaches the masses and there’s a clear regulated framework on such assets. The crypto adoption is still not as widespread yet, as currently 9.4 per cent of Singaporeans own such assets, even with the country’s crypto-friendlier regulations.
Product and services offerings 4: Personal and business loans
The digibank is likely to offer personal and business loans for users. Right now, a check on Grab’s website showed that it offers “flexible and affordable business loans” for its Grab Merchant partners.
In Singapore, Grab is a major player in the food delivery market with a market share of over 50 per cent so there’s a ready pool of merchants who can take on these products.
The Grab business loan starts from S$10,000 to up to S$100,000 over a nine-month period. According to Grab, the loan helps businesses increase their working capital and manage daily operating costs.
There’s a loan calculator online for users to tinker with and those interested have to apply online. Repayments are automatically deducted from the merchant’s bank account each month. The current business loan offering does not seem to be limited to just SMEs in the food and beverage industry.
Essentially, such business loans are an extension of a food delivery app’s service to its onboarded merchants. For GXS, the service could also potentially extend to Singtel’s cloud and telco business consumers.
Grab also offers a merchant cash advance service where businesses can apply for up to S$100,000 of funds, to be paid over a six-month period. The repayment for that will be daily.
Such loans are also what other food delivery tech giants are offering. Last month, US’s biggest meal delivery service DoorDash announced the launch of its financing arm to offer business loans to restaurants on its app. Called DoorDash Capital, merchants will be able to apply for financing to fund business operations such as purchasing equipment, paying rent, hiring, and payroll. The US tech giant commands 58 per cent of the meal delivery market in the US.
For personal loans, such loans are being offered by banks and money lenders targeted at Grab drivers (e.g. HL Bank and R2D Credit) but it is not clear if those loans are in collaboration with Grab. Direct offerings from Grab are found in markets outside of Singapore.
For example, Grab offers cash loans to GrabCar driver-partners in the Philippines and its payment process is auto deductible. A selected group of GrabCar driver-partners is eligible for the programme and the interest rate varies depending on the profile and amount of loan.
A GXS version of personal loans will likely offer similar features – auto deductible payment processes, and a customised loan for each profile.
Saturated and competitive banking industry
The road ahead for GXS Bank is exciting and new, and observers and users like myself can’t wait for it to officially start showcasing its banking features. However, we are cautiously optimistic as we note that studies have shown that customers who open new virtual bank accounts may not close their primary accounts immediately.
There are various reasons for that: namely the trust and reliability of the incumbents who have been around for decades, and there’s a notion that the large banks have the resources to upgrade their processe and our hard-earned money is stored “safely” with lower risks of cyberattacks.
But the tide may be changing as studies have also shown that millennials are more susceptible to trying out new financial products like BNPLs, and there might be a day where they completely migrate all their funds to digibanks. This isn’t surprising, as some young adults are already doing it – I’ve heard of some who have more money stored in their crypto accounts than fiat in their bank accounts.
Experts have also suggested that digibanks are capital-intensive vehicles. The new banks are expected to burn cash for the first two to three years to build their customer base, before being able to operate sustainably.
Thankfully, with Grab and Singtel’s customer base of millions across Asia, they won’t be starting from ground zero as they have built customer loyalty and their go-to army of customers may be eager to give them a shot.
Featured Image Credit: Mashable