OCBC open to new partnerships for virtual bank licence

Oversea-Chinese Banking Corp would take a minority stake in any virtual-banking joint venture, and is currently in talks with Singtel.
Oversea-Chinese Banking Corp would take a minority stake in any virtual-banking joint venture, and is currently in talks with Singtel.PHOTOS: ST FILE

It is reportedly in talks with firms to explore ways to serve new segments and markets

OCBC Bank is in talks with companies, including Singtel, about seeking one of Singapore's planned virtual bank licences, according to people familiar with the matter.

The plan is for OCBC, Singapore's second-largest bank, to take a minority stake in any virtual banking joint venture, as the bank sees it as a way to tap new customers and markets, the people said, requesting anonymity because the talks are confidential.

"We are open to forging new partnerships and ventures that allow us to serve new segments and new markets," OCBC digital and innovation head Pranav Seth said in an e-mail reply to questions, while declining to comment on any talks on a virtual licence application.

The Straits Times understands that speculation about banks and non-bank players applying for virtual bank licences has been rife as the first milestone for applications is this month.

The Monetary Authority of Singapore (MAS) said in June that it will be issuing up to five digital bank licences in a move to strengthen competition in financial services, and that it expects to invite applications this month.

The United Kingdom and Hong Kong are among major economies that have allowed licences for virtual banks, creating a new generation of rivals for traditional lenders.

The MAS initiative adds to the digital units that local lenders have been allowed to set up since 2000. The central bank said it will award up to two licences for new retail banks and as many as three for lenders to small and medium-sized enterprises (SMEs).

OCBC's discussions are preliminary, ahead of more details on the conditions for the new licence applications that the MAS is expected to issue later this month, the people said. The eventual choice of partners may change depending on licensing conditions, they added.

Of the big three domestic lenders, OCBC is the only one that does not have a pure-play digital bank, though it has been using technology to facilitate services, such as robo-investment advice and instant online account opening for SMEs.

Of the big three domestic lenders, OCBC is the only one that does not have a pure-play digital bank, though it has been using technology to facilitate services, such as robo-investment advice and instant online account opening for SMEs. DBS Group Holdings operates a digital bank in India and Indonesia, while United Overseas Bank opened one in Thailand earlier this year.

DBS Group Holdings operates a digital bank in India and Indonesia, while United Overseas Bank opened one in Thailand earlier this year.

A Singtel representative declined to comment specifically for this story, but a spokesman said in June that the telco is open to exploring the feasibility of applying for a virtual bank licence.

The company's chief executive officer Chua Sock Koong said earlier this month that it is studying the prospects for a virtual licence before deciding how to proceed.

Banks worldwide face increasing competition from telcos and technology firms that are getting into financial services including payments and lending.

But some are partnering, including in Hong Kong where Standard Chartered tied up with PCCW earlier this year to create a virtual bank. Standard Chartered holds a 65 per cent stake in one of the territory's new virtual banks, with PCCW, HKT Trust & HKT Limited and Ctrip Financial Management (Hong Kong) owning the balance. BLOOMBERG

• Additional reporting by Aw Cheng Wei

A version of this article appeared in the print edition of The Straits Times on August 22, 2019, with the headline 'OCBC open to new partnerships for virtual bank licence'. Print Edition | Subscribe