Tyme Group, which operates digital banks in South Africa and the Philippines, has raised US$250 million in its Series D funding round, valuing it at US$1.5 billion. The new capital injection will support Tyme’s expansion into new markets, including Vietnam and Indonesia. In Vietnam, where it only has merchant lending operations, Tyme plans to roll out core transaction banking products later in 2025. In Indonesia, meanwhile, the digital bank also plans to launch merchant cash advance and is looking for a banking license, according to Reuters.
This is the second blog in our series on Digital Asset Custody, in partnership with Ripple. The first blog in the series highlighted the rise of digital assets in Asia Pacific, exploring the opportunities and challenges for custodian banks in this growing space.
In early December, BSP Deputy Governor Chuchi Fonacier told reporters that there is a “possibility” the Philippine central bank would allow four new digital banks in 2025. The regulator highlighted key factors that would be considered in determining the winners, which were mostly boilerplate – a unique value proposition, an innovative business model not yet offered by existing market players, and so on. The capitalization requirements, meanwhile, are modest, at 1 billion Philippine pesos (US$17,300,000).
Thailand’s Siam Commercial Bank (SCB) is among the most proactive lenders in Southeast Asia when it comes to digital finance. It recently has started on work on a Thai baht stablecoin project and is setting up a digital bank in Thailand together with South Korea’s Kakao Bank.
It was not long ago that Viva Republica CEO Lee Seung-gun praised South Korea’s fintech market and financial regulators. “Korea is a market where fintech companies can build their foundational strength for overseas expansion,” he said in September at Korea Investment Week in Seoul. “There is no country where the government leads financial innovation as much as Korea,” he added. And yet Viva Republica seems to have decided against an IPO on the Korea Stock Exchange (KRX). Instead, it is likely to go public in the United States, according to several Korean media reports.
South Korea’s K Bank had a strong third quarter during which its net income surged almost 181% annually to 37 billion won (US$26.3 million). Through September, the online lender had accrued profits of 122.4 billion won, up 220% from the first nine months of 2023. K Bank’s customer numbers are rising steadily as well, reaching 12 million by the end of September, thanks to strong demand for high-interest rate deposits, cashback programs and mortgage loans. There was really no bad news in K Bank’s earnings report, but the lender still faces significant challenges due to its close ties with the cryptocurrency exchange Upbit and its general high reliance on digital assets to fuel growth.
This is the first blog in our series on Digital Asset Custody, in partnership with Ripple.
South Korea’s No. 2 digital bank K Bank has postponed its IPO plans yet again, after seemingly having committed to a listing in the near future. This development comes as something of a surprise. K Bank posted a net profit of 85.4 billion won (US$64 million) in the first half of this year, the highest since its establishment and more than thrice as much as during the same period a year ago. It seemed that the company had adequate momentum to finally go public. However, looking at a few aspects of K Bank’s business model, we can see why it is delaying the IPO again.
For nearly 3 ½ years, the Philippines has been on the gray list of The Financial Action Task Force (FATF), which assessed the Southeast Asian country to have inadequate money-laundering and counterterrorism financing controls. Since then, the Philippines has been working to improve those controls so that it can be removed from the list, which is detrimental to the country’s business environment. Its next opportunity to be removed from the list will be in February 2025.
More than five years after Hong Kong regulators first announced they would allow digital banks, the online lenders are performing modestly at best – and in some cases, not well at all. The argument that introducing digital banks would somehow alter the competitive landscape of banking in the city and put heavy pressure on incumbent lenders seems increasingly unrealistic. After all, incumbent heavyweights like HSBC and Standard Chartered have long been investing heavily in digitization. Yet both the banks and regulators have been reluctant to acknowledge underlying problems.
Viva Republica’s Toss Bank has been visibly contemplating an initial public offering (IPO) since earlier this year. It is aiming to achieve a valuation of 15 to 20 trillion won (US$11 billion-US$15 billion). Toss is feeling increasingly good about going public because of what it sees as strong fundamentals. It has amassed more than 19.1 million monthly active users, while its loan brokerage, payments, advertising and tax services are performing well, as is its subsidiary Toss Securities.
On October 4, Singapore’s Inter-Ministerial Committee announced new anti-money laundering (AML) recommendations. They include data sharing between agencies, flagging and striking off inactive companies, and programs to educate businesses about suspicious activity and increase the likelihood that they report such activity.
Indonesia’s P2P lending industry has fallen on hard times. After several years of relatively unchecked P2P lending expansion, regulators have decided to crack down on problematic industry players with an eye on heading off catastrophic failures. No doubt China’s experience in the 2010s is instructive for Indonesia, which does not want to see its own retail investors be robbed of their life savings in pyramid or Ponzi schemes.
TymeBank is a rising star in Africa as well a key player in the Philippines’ fintech sector. It is one of the few online banks of note to emerge from Africa thus far. TymeBank claims to be one of South Africa’s fastest growing banks and recently reported reaching 10 million customers. While many digital banks highlight rapid customer acquisition, TymeBank appears to be an outlier with its presence in several emerging markets and a strong balance sheet.
Taiwan is grappling with an increasingly serious scam problem, according to a new report that surveyed 25,000 people across the region has found. Conducted jointly by the Global Anti-Scam Alliance, Gogolook and ScamAdviser, a Web site legitimacy checker, the report found that Taiwanese may have lost up to US$7.5 billion over the past 12 months. On average, Taiwanese each lost US$1,940 to scammers, equivalent to 1% of GDP in 2023.
Taiwan has long been one of the most overbanked markets in Asia. Strolling the streets of Taipei, one sees a plethora of physical bank branches. Overall, Taiwan has 37 banks, 21 life insurers and 50 securities brokers for a market of just 23 million people. Despite regulatory pressure for consolidation, there have been very few bank mergers in Taiwan over the past two decades.
Of the major economies in East Asia, Thailand has been among the slowest to introduce digital banks. The Bank of Thailand (BoT) has never said much about its decision-making rationale in public, but we reckon the Kingdom’s relatively high banked rate (more than 80%) has something to do with it. The wait is finally over, however. The deadline for submitting an application for a digital bank was September 19, and there only be three licenses awarded.
Revolut has long had its eye on the India market, where it has sought to carve out a niche in payments before moving into trading, investment and credit. More than three years into the foray, Revolut does not have a lot to show for it, though in April, the Reserve Bank of India (RBI) granted the UK fintech in-principle authorization to issue pre-paid instruments (PPI), including prepaid cards and wallets. We understand it took so long in part because of data localization requirements.
In 2021, Bangko Sentral ng Pilipinas (BSP) imposed a three-year moratorium on applications for digital banking licenses so that it would have enough time to monitor the performance of the new online lenders and their impact on the financial system. It will take time for Philippine online banks to get out of the red, and in March, the BSP said that just two of the official digital lenders – which it did not identify – are profitable. It may take five to seven years before the others reach that milestone. Nevertheless, the Philippine central bank is pressing ahead with its plan to allow for more digital banks. From January 1, 2025, four more licensed online lenders will be permitted.
How is it that a digital bank startup expects to become the No. 4 retail lender in Singapore before long? After all, digital banks are, with the occasional exception, better known for losing money than making a profit. Of the four online lenders who received licenses in December 2020, not one is currently profitable. However, Trust Bank, which launched in September 2022, is a different story. Trust Bank is not a traditional digital banking venture but rather an entity created by large incumbent lender Standard Chartered and supermarket chain Fair Price Group.
South Korea’s No. 2 digital bank K Bank had been planning to go public on the Korea Exchange (KRX) at the end of this year, but has been hesitant to make that commitment given uncertain market conditions. However, K Bank posted such a strong performance in the first half of the year that it may decide the time is right to go public irrespective of market fluctuations. South Korea’s first online lender posted a net profit of 85.4 billion won (US$64 million) in the first half of this year, the highest since its establishment and more than thrice as much as during the same period a year ago.
It was not so long agao that Indonesia’s troubled peer-to-peer (P2P) lending company Investree was riding high. In October 2023, the company announced it had raised US$231 million in a Series D funding round led by Qatar’s JTA International Holding which also included participation from Japan’s SBI Holdings. The Series D round suggested high investor confidence in Investree, which had previously raised $23.5 million in a March 2020 Series C round led by MUFG Innovation Partners and Bank Rakyat Indonesia Ventures. Yet the company has since been flummoxed by problems with its management, bad loans and lawsuits. In late August, Investree established a caretaker team to manage its daily operations under the guidance of Indonesia’s Financial Services Authority (OJK).
Kakao Bank has a history of proving wrong skeptics of digital banks. It has been consistently profitable since 2019 and is now set to expand in Southeast Asia. It has managed, for the most part, to stay out of regulatory crosshairs despite disrupting South Korea’s financial services sector. It seemed Kakao Bank’s long string of good fortune might finally have come to an end with the arrest of its parent company’s founder Kim Beom-su on July 23. He has been accused of manipulating stocks during Kakao’s acquisition of the K-Pop agency SM Entertainment last year. Yet thus far, the company’s stock price has been stable, increasing 2% to 21,900 won over the past month, while its second quarter earnings were solid.
China has long been working on the development of an alternative payments system that would not be dependent on the U.S. dollar. It is not a single payments rail, but more a series of initiatives that collectively aim to make Beijing a stronger player in global payments infrastructure that can operate outside of the confines of the dollar-dominated system. These include a Chinese version of the Swift messaging network, the digital renminbi (e-CNY), the respective payment networks of Alipay and Tenpay, and various bilateral deals Beijing has established with countries.
With the September 19 deadline for Thailand’s digital bank license applications less than a month away, it is worth taking a closer look at the prospective applicants. As expected, startups are absent. Instead, the likely applicants – and winners – are a mix of Thailand’s ultra-wealthy tycoons, prominent incumbent banks and Asian tech giants. The newest would-be applicant belongs to the latter category.
There is a fundamental problem with digital banks in Hong Kong. Not only are they non-essential because the city’s population is so well banked, they also are almost all the offshoots of large incumbent lenders and/or tech companies. What that means is that most of them lack a startup ethos. While a startup mentality can result in massive cash burn – as seen with Revolut in the UK or N26 in Germany – it also can lead to genuine product innovation. In the absence of such innovation, online lenders resort to gimmicks like high deposit interest rates to attract customers. It is thus no surprise that the eight licensees together owned HK$49.9 billion (US$6.4 billion) in assets last year. That is just 0.3% of the assets owned by all the city's retail banks, according to the Hong Kong Monetary Authority’s data.
South Korea’s No. 2 digital bank K Bank had been planning to go public on the Korea Exchange (KRX) at the end of this year, but unfavorable market conditions could force the company to delay the listing. There are three main issues that could adversely impact the IPO: the softening of the U.S. economy, the legal troubles of the founder of rival internet bank Kakao Bank and the souring of regulators’ views on digital lenders.
The Singaporean sovereign wealth fund Temasek has long been one of the largest institutional investors in China, reflecting the close economic ties between the city-state and the world’s second largest economy. As recently as 2020, China accounted for 29% of Temasek’s portfolio. However, today Temasek’s investments in China have fallen to just 19% of its portfolio, below the U.S. at 22% and Singapore at 27%.
Looking at the stock price of Singaporean platform company Grab, one wonders what investors truly think about this company’s prospects. Since its Dec. 2021 Nasdaq debut in a SPAC merger, Grab has lost 74% of its market value. The stock’s 52-week high is just US$3.88. We suspect that investors are concerned about the viability of Grab’s super app business strategy – which may struggle to pivot away from a focus on growth – even if individual units of the company are doing well. Grab does seem confident about its fintech business though and foresees profitability for its Singaporean digital bank before too long.
Who needs more digital banks in Southeast Asia? If you asked us, we would say not too many countries do. Certainly not Singapore, probably not Malaysia or Thailand, and even though Indonesia is a huge market, it already has a lot of online lenders.
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What to make of ANEXT Bank? On the one hand, Ant Group has been focused for years now on expanding its presence in Southeast Asia. Its Singapore digital bank, which provides multi-currency business accounts, unsecured financing with flexible repayment options, and fixed deposit accounts to SMEs, is a key part of that expansion effort. And Ant has continuously injected large amounts of capital into ANEXT. On the other, from a financial standpoint, ANEXT’s performance remains underwhelming, and it is unclear how large the company’s addressable market is in Singapore.
Kakao Bank has long proven skeptics of digital banks wrong. It has been profitable since 2019 and is now set to expand in Southeast Asia. There is just one problem: Its parent company’s founder Kim Beom-su was arrested on July 23. He has been accused of manipulating stocks during Kakao’s acquisition of the K-Pop agency SM Entertainment last year.
Singapore’s digital banks have been underwhelming in their first few years of operation, though the likely raising of a deposit cap in July 2023 has benefited Sea’s MariBank and Grab-Singtel’s GXS Bank. It was always a risky endeavor to bet on the retail segment given how well served it already is in the city-state, but there is no turning back now for Singapore’s preeminent platform companies. The question is whether MariBank’s big loss in 2023 should be viewed as a glass half empty or half full.
We remember when Australia first kicked off its open banking initiative, known as the “consumer data right,” with much fanfare five years ago. The program was supposed to increase the quality of banking services to consumers by giving them access – in theory – to more of a customized experience in which they could pick and choose which services they wanted from which providers. They only had to agree to let their data be shared with different banks. However, a recent report by the Australia Banking Association (ABA) found that just 0.3% of bank customers are using the program, suggesting that it has been a failure and that Australia needs to reimagine its approach to open banking.