Asia Banking Research

Revolut is one of Europe's biggest neobanks, but its ambitions are global. Pre-pandemic, Revolut planned to expand to a dizzying array of countries and territories. In September 2019, Revolut announced that within Asia-Pacific it would focus first on Singapore, Australia and Japan. Given its partnership with Visa, the UK neobank said it could later expand to Hong Kong, Taiwan, Korea, Indonesia, Malaysia, the Philippines, Thailand, Vietnam and India.

Cambodia has a costly money-laundering problem, both in fiscal and reputational terms. Effective October 1, the EU's revised list of third countries at high risk of money laundering came into effect. Cambodia was one of three newly listed East Asian countries along with Myanmar and Mongolia. Cambodia is also on FATF's money-laundering gray list. Being seen as a high money-laundering risk nation could complicate Cambodia's efforts to woo foreign investment amid the prolonged pandemic-induced downturn. The Cambodian economy is set to contract 4 to 5% this year.

The Malaysia digital banking race is taking shape as a growing number of non-financial firms signal their intention to apply for a digital bank license. Bank Negara Malaysia is expected to issue up to five licenses valid for conducting conventional or Islamic banking in the country. Per the Malaysian central bank's requirements, the new digital banks should focus on boosting financial inclusion primarily through digital means. Potential applicants include telecoms firms Axiata Group (which owns the e-wallet Boost) and Green Packet, ride-hailing giant Grab, gaming company Razer and conglomerate Sunway as well aas the Hong Kong-based financial group AMTD and the Malaysian bank AMMB.

Australia is struggling to win its fight against financial crime in part because its biggest banks cannot effectively contain money laundering. The bank themselves are rarely willing participants in illicit activity. Rather, ineffective money-laundering controls foment compliance weaknesses that criminals exploit.

Many Asian countries struggle to contain money laundering, which is usually perpetrated by non-state actors. North Korea is different. The North Korean state itself is deeply involved in money-laundering schemes, often in cahoots with Chinese entities, to help Pyongyang evade economic sanctions, access hard currency and fund North Korea's nuclear program. Confidential bank documents first reviewed by BuzzFeed News and part of the FinCEN files show just how successful North Korea continues to be in laundering large amounts of money through the global financial system.

In mid-September, Tencent opened a Singapore office that will serve as its regional hub, reflecting the Chinese tech giant's growing focus on Southeast Asia. Tencent aims to build a digital services ecosystem in the Asean countries that replicates the success it has achieved at home. Digital banking forms one cornerstone of that strategy, although less overtly than in the case of Tencent's rival Alibaba. Rather than applying for its own digital bank license in Singapore, like Ant Group, Tencent is instead relying on strategic stakes it has taken in internet companies, such as Singapore's own Sea.

Neobanks like to talk about disruption, but in Hong Kong, they're actually putting their money where their mouth is. Five of the eight virtual banks approved to operate in the former British colony have gone live: ZA Bank, Airstar, WeLab, Fusion Bank and Livi Bank. While none of them has a game-changing value proposition yet, their low fees, digital agility and high deposit rates (at least during a promotional period) are bound to attract customer interest. Their digital acumen is taking on new importance during the pandemic, which recently flared up in Hong Kong.

Grab isn't just Southeast Asia's most valuable startup: It's also the most ambitious. Grab aims to give digital banking pride of place in an ecosystem heretofore reliant on ride hailing and food delivery. The user base is there to make the digibanking gambit work, Grab says, pointing to its millions of passengers, drivers and food-delivery customers.

China's ByteDance is quietly deepening a push into fintech in Asia as the future of its U.S. operations hangs in the balance. ByteDance's popular short-form mobile video platform TikTok has become a major front in the U.S.-China technology war. Now more than ever, ByteDance needs to monetize its services. Fintech could be a way forward for the company, whose US$100 billion valuation makes it the world's most valuable startup in private markets.

Singapore may be the Lion City, but there's an elephant in the room when it comes to digital banking: Incumbents are readier than ever for the challengers. Singapore's Big Three of DBS, OCBC and UOB have been digitizing for years with varied degrees of success. The pandemic gave them an opportunity to fast track the process. After all, when retail branches are closed and everyone stays home, banking digitally becomes a necessity, not a convenience.

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