Asia Banking Research
June 30 was the deadline for Malaysia’s digital bank licenses and there were 29 applicants for a maximum of five licenses from a wide variety of would-be neobanks, among them platform companies, incumbent lenders, conglomerates, state governments, fintechs and more. The Malaysian central bank will name the winners of the licenses in early 2022.
The digital banking proposition in Singapore has always been a bit curious. A central tenet of the case for digital banks in the city-state is that, well, Hong Kong has them, and besides, digital lenders can boost financial inclusion – as long as the definition of financial inclusion is broad. 98% of Singaporeans aged 25 and above have a bank account according to Allianz Global Wealth , so when we talk about financial inclusion in Singapore, we are not talking about the same thing as in Indonesia (34% of adults have a bank account) or the Philippines (29% of adults are banked).
Can NAB sort out its compliance shortcomings?
Australia’s Big Four banks have had their fair share of compliance travails in recent years. That much was made clear in the report produced by The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. Since the report was published in 2019, Westpac and Commonwealth Bank of Australia have borne the brunt of fines issued for money-laundering violations. However, National Australia Bank (NAB) is now the one in AUSTRAC’s crosshairs.
Earlier this year, it was unclear if peer-to-peer (P2P) lending had a future in South Korea. Legislation passed in August 2020 to curb malfeasance in the industry had made it harder to operate legally. This legislation banned P2P lenders from lending money they borrow from commercial banks and required they have paid-in capital of at least 500 million won (US$440 million) and register with the Financial Services Commission (FSC) within a year. The regulator’s decision to license several prominent P2P lenders signals that the industry has a way forward in South Korea.
In their first year of operation, Hong Kong’s virtual banks all lost money. Ant Bank lost the least at HK$172 million while Standard Chartered-backed Mox Bank lost the most at HK$456 million, according to the banks’ respective annual reports. While it is still early days for Hong Kong’s digital lenders, it appears a few of them are pulling ahead of the pack.
Digital banking heats up in the Philippines
For digital banks, the Philippines is among the most promising markets in Southeast Asia because of its large overall size (population 110 million) and significant unbanked population. About 71% of adults in the Philippines people lack a bank account, but more than 2/3 of the population has a smartphone. Thus far, the BSP has issued three of the five digital bank licenses up for grabs. In April, Overseas Filipino Bank (OF Bank), a subsidiary of government-owned Land Bank of the Philippines, received one. In June, the BSP awarded two more digital banking licenses, one to Tonik and one to UNObank.
P2P lending grows steadily in Indonesia
Indonesia’s peer-to-peer (P2P) lending sector is growing steadily after a pandemic-induced slowdown in 2020. Regulators, mindful of the sector’s ability to boost financial inclusion but wary of the risks that can build up when oversight is too light, have been gradually issuing licenses to legitimate companies while penalizing bad actors.
Malaysia’s digital banking race intensifies
Malaysia’s digital banking race is kicking into high gear as a growing number of firms throw their hats into the ring. There are reportedly 40 firms interested in applying for five digital bank licenses, with the application period closing June 30 and Bank Negara planning to issue the licenses by the first quarter of 2022.
Digital banking heats up in South Korea
South Korea’s digital banks are on a roll, buoyed by robust demand for digital financial services amid the pandemic. South Korea went cashless long ago with credit cards, but since the pandemic hit in early 2020, mobile banking has taken off. As a result, Kakao Bank, K bank and Toss have grown exponentially. All three of South Korea’s digital banks are on track for IPOs in the next two years, with Kakao likely to go public first.
No great loss: Sea Group has a cracking Q1
It never felt so good to lose US$422 million. Just ask Sea Group. Southeast Asia’s most valuable listed company indeed went deeper into the red in the first quarter, but its revenue also grew 147% year-on-year to US$1.76 billion. Investors like what they see. Sea’s stock price has risen almost threefold to US$246 from roughly US$83 a year ago.
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Australia gets tougher on financial crime
Australian regulators are stepping up the fight against financial crime after issuing a staggering US$921.59 million in fines in 2020. Disciplinary action against Westpac for serious breaches of Australia’s AML/CFT act accounted for US$920.7 million of that total.In the Asia-Pacific region, only Malaysia issued more fines than Australia in 2020, and that was because of the 1MDB scandal.
Why did OCBC have a sterling Q1?
Singapore’s largest lenders have started the year off on a cracking note. First DBS reported record earnings and now OCBC has done the same. The city-state’s second largest bank posted a net profit of S$1.5 billion in the January to March period, compared to S$698 million during the same period a year earlier and well exceeding Refinitiv’s estimate of S$1.08 billion.
South Korean banks feel pressure from fintechs
South Korea only has a handful of prominent fintechs, but they are still managing to give incumbents a bank a run for their money when it comes to online banking services. Chief among them is Kakao Bank, with 14.1 million users (more than ¼ of South Korea’s population) as well as K bank and Viva Republica’s Toss, which will launch a digital bank later this year. With the rising popularity of digital banking, South Korea’s traditional lenders are mulling launching neobanks of their own.
DBS posts record earnings in first quarter
2021 is shaping up to be a pretty good year for DBS. Southeast Asia’s largest bank posted record earnings of US$1.52 billion in the January-March period, up 72% year-on-year. DBS generated record fee income in the first quarter, with especially strong growth in wealth management and transaction services, both of which hit new highs. DBS is not resting on its laurels though and plans to boost both its digital capabilities and international footprint.