Asia Banking Research

The pandemic has disrupted Malaysia's digital banking plans, but the ensuing delay may be a boon for interested firms that now have more time to select partners. The original contenders for up to five digital bank licenses include ride-hailing giant Grab, telecoms juggernaut Axiata Group Bhd (owner of e-wallet Boost) and the banks CIMB, Affin Hong Leong, AMMB Holdings and Standard Chartered Bank. Those banks are now reportedly less interested in obtaining a license, while several non-financial firms may throw their hat into the ring: gaming giant Razer, conglomerate Sunway Group, telecoms company Green Packet. Hong Kong investment bank AMTD may also bid for a license.

Southeast Asia's most valuable tech startup is coming down to earth at last, despite maintaining a sky-high valuation of more than US$14 billion. Faced with the pandemic-induced downturn, Singapore-based Grab is scaling back its ambitions and remarkably, cutting costs. That involves eliminating some superfluous business units and trimming about 5% of its workforce. Grab's professed goal is to rejig its operations to focus on three core businesses: ride-hailing, food delivery and digital banking. Its unstated goal is to get its finances in order so that its bid for a Singapore digital full back license is successful.

Australia launched its open banking regime on July 1, ushering in an era of increased competition and customer choice. The regime allows a customer of any of Australia's Big Four banks - National Australia Bank, Commonwealth Bank, Australia and New Zealand Banking Group and Westpac - to ask that their account and card data be sent to a third party accredited by the Australian Competition and Consumer Commission. In November, mortgages and personal loan data will be introduced, while smaller banks will join in 2021.

Cambodia's digital banking initiatives are increasingly on the money. The Kingdom has focused on fast-tracking digital banking to boost financial inclusion and develop the broader banking sector, which only serves a limited portion of the population. Just 22% of Cambodia's population of 16.2 million is banked. The good news is that fintech is bringing more Cambodians into the formal financial system. In 2019, active digital wallets in Cambodia jumped 64% to 5.22 million, according to a June report by the National Bank of Cambodia (NBC).

Taiwan's virtual banks were supposed to go live this summer but the coronavirus pandemic has delayed the launch date. The three neobanks, which include consortia led by Line Financial, Chunghwa Telecom and Japanese e-commerce giant Rakuten, will likely launch later in the year, according to Taiwan's Financial Supervisory Commission (FSC). The three neobanks have yet to start one-month operation simulation tests, a pilot period required by the FSC to ensure the banks are in shipshape.

The Singapore digital banking race is accelerating. The Monetary Authority of Singapaore (MAS) has winnowed down the applicant field from 21 to 14. While the MAS did not say which contenders failed to make the cut, observers close to the matter say that the consortia headed by Grab/Singtel, Sea, Razer and MatchMove have all advanced to the next round. Those four applicants are all bidding for a coveted digital full bank (DFB) license, which permits holders to serve both retail and non-retail customers. The MAS plans to issue a maximum of two DFB licenses.

Hong Kong's virtual banks will not easily unseat entrenched incumbents, but the newcomers are already succeeding in one respect: They are forcing traditional banks to up their digital game. This trend started well before the coronavirus pandemic, but has accelerated as concerns about the virus impede customer visits to physical branches. The virus is acting as a catalyst for digital transformation among Hong Kong's incumbent banks just as the virtual banks are launching.

South Korea's K bank, one of three licensed virtual banks in the country, is planning to reopen in July if it can secure additional capital. K bank suspended most of its services about a year ago amid fundraising travails. It would be an impressive feat for the bank to resolve those capital issues amid the pandemic-induced downturn. South Korea entered a technical recession in the second quarter with GDP expected to contract 2% compared to the January-March period, according to the Bank of Korea.

Indonesia's Gojek is one of Asia's most ambitious unicorns. It leads the ride-hailing and food-delivery markets in Indonesia, and is steadily increasing its digital banking services. In June, it filed trademarks for new business entities that could pave the way for expansion into corporate services, live-video conferencing and electronics repair. Yet the company remains unprofitable eight years after its founding. Gojek needs to boost the stickiness of its app and speed up monetization. That's why it's a wise move for the company to partner with Facebook and PayPal, which took took respective 2.4% and 0.6% stakes in Gojek's fintech arm GoPay, a regulatory filing shows. The U.S. tech giants' investments were part of a fundraising round that reportedly values at Gojek at more than US$10 billion.

In May the European Commission named Cambodia as one of 12 nations at a high risk for money laundering and terrorism financing. The EC's move is a setback for Cambodia, which aims to attract foreign investment and develop a thriving digital economy. The kingdom will likely be added to a list that includes countries such as North Korea Iran, Yemen, Syria and Afghanistan. The EC said that it sought to better align with the international money-laundering watchdog FATF, which put Cambodia on its gray list in February 2019 for having "significant deficiencies" in its anti-money laundering and counter-terrorism financing regime.

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