Calm Down, Grab Isn’t Trying to Become a Bank—Not in the Way You’re Thinking, at Leastby Ellia Pikri June 12, 2019
Followers of this page are well aware that Grab, one of Singapore’s premier unicorns, has dabbled in many different areas of fintech-fuelled offerings in its drive to become what it self-describes as a “super app”.
Most recently though, it seems like the company might be taking the leap and shifting into banking, according to Reuters’ insider sources.
The source further claims that Grab is close to hiring a consultancy to advise it on its banking potential.
Before we jump the gun though, Grab’s eye is not on becoming a bank the traditional sense.
Grab expressed its interest following Monetary Authority of Singapore’s (MAS) announcement that they are pondering issuing a virtual banking license.
A virtual banking license here usually refers to a fully digital financial operation run by companies without banking parentage per se (though it does not preclude banking institutions from participating, as showcased by CIMB).
Virtual Banks are Tech-First Banks With Training Wheels
Virtual banks generally have slightly lower requirements than a full banking license.
Singapore’s consideration probably comes from its competitive streak with Hong Kong, which has issued 8 virtual banking licenses so far. However, Hong Kong’s licenses have been criticised for being too stringent so it may not be a clear indication of a more typical virtual banking license. Looking away from the east, some indicators of a virtual banking license is a lower minimum capital requirement, which is only €5 million as set by UK’s regulators.
At the same time, UK also imposes banking restrictions on virtual banks as they grow and prove their mettle in the market before they may be deemed worthy enough for a full banking license. One virtual bank that has received its full banking license—and no banking restrictions—is Monzo.
The Australian Prudential Regulation Authority (ARPA) has also embarked on a similar strategy, where it only grants virtual banks a Restricted ADI license, which only allows them to operate as a virtual bank for two years while they build their capabilities and resources. Of Australia’s two registered virtual banks, one named Volt has received its unrestricted banking license earlier this year.
The ride-hailing unicorn’s potential launch is also already subject to competition. According to Bloomberg again, Singtel may also be eyeing the virtual banking license if the right opportunity presents itself to the telco, while a UK-import virtual bank Revolut is slated for launch sometime this year.
Grab has been on the fintech warpath since the 2018 launch of their fintech arm, the aptly named Grab Financial. Since then, Grab has announced or launched different finance-related verticals like its e-wallet GrabPay, wallet-to-wallet remittance across country borders, mobile insurance via app, a Mastercard-enabled physical complement to their e-wallet, and some other offerings.
With an existing plan towards a one-stop integrated platform that extends into other fintech products, Grab’s move into virtual banking in Singapore is probably more of a rebranding (and regulatory compliance) exercise.
Even if Singapore ends up going the more restrictive license granting route that Hong Kong has opted for, Grab may be in a position to adhere to the license requirements, perhaps with a cheeky fundraising round or two.
Those who are excited at the prospect should also control their excitement, because as of now there are no official confirmation that MAS will indeed be looking at a virtual banking framework.
Featured Image edited from Grab