Tencent-Backed Sea’s Digital Bank Bid in Singapore Targets Millennials

(Bloomberg) -- Singapore’s Sea Ltd., Asia’s best-performing internet stock in 2019, is seeking a full digital banking license in Singapore, becoming the first declared sole applicant for that category.

New York-listed Sea’s digital bank would focus on addressing the unmet needs of millennials and small businesses through technology, the company said in a statement. The Monetary Authority of Singapore said Tuesday that 21 groups made bids for the digital licenses, including seven for full digital banking licenses. Fourteen were for wholesale permits.

MAS unveiled plans last year to grant as many as five virtual bank licenses to boost competition and innovation, and is set to announce the winners in June. Efforts to open up the Singapore banking industry to technology companies come on the heels of a similar move in Hong Kong, where units of Ant Financial and other Chinese firms including Tencent Holdings Ltd. obtained licenses. Ant has applied for a Singapore wholesale digital banking license.

Southeast Asia’s digital lending market is expected to more than quadruple to $110 billion by 2025, according to a report by Bain & Co., Google and Temasek Holdings Pte.

The two main operating divisions of Sea, which counts Tencent as its largest outside shareholder, are Shopee, a popular online shopping platform in Southeast Asia and Taiwan, and gaming arm Garena. Shopee’s users include SME and millennial consumers. Sea also has a digital financial services arm, SeaMoney.

“Through Garena, Shopee, and SeaMoney, we have unrivaled insight into the needs and wants of millennials and SMEs across the region,” said Forrest Li, Sea’s chief executive officer. “We have also developed exceptional capabilities in addressing these unmet needs, and have the technology, infrastructure, data analytics capabilities, and management experience to design and scale Singapore’s first full digital bank.”

The full digital banks will require total capital of S$1.5 billion ($1.1 billion) and must be controlled by Singaporeans. They will be allowed to provide a range of financial services as well as take deposits from retail customers. The MAS plans to award as many as two such permits.

Earlier this month, gaming company Razer Inc. said it had teamed up with homegrown Singaporean entrepreneurs and Asian billionaires to apply for a full banking license. The Razer-led group also targets younger users. Other bidders include the Grab Holdings Inc.-Singapore Telecommunications Ltd. group and Beyond Consortium, which is led by one of Asia’s largest massage chair makers, V3 Group Ltd. and stored-value card company EZ-Link Pte.

One of Sea’s key advantages over the other known applicants is its potential to tap its sizable user base across gaming and e-commerce to become customers of its digital bank, said Vey-Sern Ling, a senior analyst at Bloomberg Intelligence.

“These are young, generally tech savvy, and many have established paying-relationships with Sea,” Ling said. “Shopee’s leading position in regional e-commerce will likewise provide multiple business cases for Sea’s digital bank.”

In 2019, Sea went on to outperform all other major Asian internet stocks with a gain of 255%, its best year since going public in New York in 2017. Investors are optimistic about the company’s revenue outlook. Sea’s stock closed at an all-time high of $40.49 on Friday.

(Updates with an analyst comment and a stock chart from ninth paragraph.)

--With assistance from Chanyaporn Chanjaroen.

To contact the reporter on this story: Yoolim Lee in Singapore at yoolim@bloomberg.net

To contact the editors responsible for this story: Edwin Chan at echan273@bloomberg.net, Colum Murphy, Vlad Savov

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