Digital banks news – February 2020

digital banks news february 2020

Welcome to the newsletter for February, containing the latest’ need to knows’ and news updates from the digital banking sector.

This month, we look at digital banking developments in Thailand, detail an amazing offer in Hong Kong, and look at a new move into the UK market; plus more digital banking updates from around the world. 

Is Thailand next for digital banks?

Thailand could follow neighbor Malaysia into the world of digital banking, after it was announced that The Bank of Thailand is looking at licensing requirements.

Ronadol Numnonda, Thailand’s deputy governor for financial institutions stability, has highlighted the potential of digital banks to enhance financial inclusion in the ‘Land of Smiles’. Mr. Numonda told the Bangkok Post: “In the digital era, the central bank needs to consider the overall banking landscape in the long term, and digital banks are an option. Whether digital bank licenses will be issued needs a comprehensive study of all dimensions.”

There is already a virtual banking presence in Thailand, with many payment methods available through digital platforms. The Bangkok Post has reported that the already established high street bank Siam Commercial Bank could be one of the first organizations to dip their toes into digital waters, with services being offered through its subsidiary SCB 10X Co Ltd. Siam Commercial Bank competitor KBank has also told the publication it has a digital strategy ready. 

Philippines’ first finds partner 

The first digital-only bank in the Philippines – which is expected to launch this year – will partner with Finastra, the financial technology company, it has been announced.

Tonik will provide a full range of banking services to the retail market, including personal loans and retail deposits. Now it has been confirmed that Tonik will utilize the cloud platform provided by Finastra to provide the infrastructure for its end to end banking.

The company will join European digital banks Gravity and Revverbank on Finastra’s client list and will be given a data residency at the Microsoft Azure Southeast Asia data center, which is used in Singapore. 

Tonik aims to increase financial inclusion in the Philippines, where it says 70 percent of adults are not signed up to a bank. Despite the vast majority of the country’s adult population not using banking services, there is high internet usage, highlighting digital banking’s potential in the country.

Holvi makes a move on the UK market

While businesses based in the UK might be full of trepidation at an impending exit from the EU, Holvi certainly isn’t. The Finnish digital banking provider tailors its services for sole traders and freelancers and is now ready to enter the UK market.

Considering the size of the UK’s small business market, perhaps the move isn’t surprising. Holvi chief executive Antti-Jussi Suominen explained to the Sifted news platform: “It is the biggest sole trader market in Europe. There are nearly six million small businesses and three-quarters of those with no employees, i.e., one-person operations. If you want to make it big in Europe in this area, you have to be in the UK at some point.”

The UK’s Financial Conduct Authority has assured Holvi that it will be able to operate in the UK for now with its Finnish banking license, but the organization may yet have to apply for a different license in the future. The UK already has a number of digital banking services that are geared towards SMEs, including Anna and Coconut.

Launch your digital bank in 90 days’ proclaims Swiss tech provider

The US digital banking market will soon be aided by a ready-made solution that promises to help brands create a digital bank platform in as little as 90 days. Temenos, the Swiss core provider, has made the claim, which is switching its attention Stateside to provide a software-as-a-service solution for digital banks.

Temenos will provide clients with a ‘tool kit’ that allows them to service consumers and remain competitive with the latest market trends. Temenos believes that its new product will deliver the key benefits of offering a comprehensive solution while speeding up time to launch. 

The company’s chief product officer for North America, Ranganathan Sathianarayanan, told the Banking Innovation platform some more details: “We’re delivering this as a SaaS [software as a service] solution on the cloud, with the ability to scale up and down, and add new products with a faster time to market. It includes Infinity, a front-office solution; Transact, which is core banking, such as deposits; and Temenos Payments.”

Tenemos will allow digital banks to offer security features such as anti-fraud and anti-money laundering. Its existing client list includes Australian digital bank Judo. The firm will allow banks to launch their own products, tailored to their requirements. It will support artificial intelligence tools and be adaptable to regulations which are unique to the United States, including data compliance. 

Hong Kongers offered 6 percent deposit rate

Digital bank customers in Hong Kong can soon look forward to a six percent deposit rate, thanks to a ZA Bank trial. Recognized as one of Hong Kong’s digital banking pioneers, ZA Bank has now announced an introductory rate of six percent for deposits – the accounts will have a two percent deposit rate, but will offer up to four percent top-ups to some clients. 

The trial started last month and applied to three-month deposits capped at HK$200,000. While there has been speculation in some quarters that the offer is nothing more than a PR move, it has certainly got tongues wagging. The move also gives ZA Bank a way into the massive time deposit business in Hong Kong, which is valued at $410 billion.

However, despite the publicity generated by the offer, one expert has told the South China Morning Post that the rate is unlikely to convince traditional banks to follow suit. Alan Yip of the Bank of East Asia said: “Traditional banks are only taking a wait-and-see approach now as the virtual banking business has yet to make a splash. The market impact shouldn’t be very significant yet as they will need time to develop. Therefore, the higher rate may not become a trend soon.”

Experts outline challenges for Singapore market

Over 20 companies have applied for digital bank licenses in Singapore. Still, experts have outlined the challenges which await licenses in a market that features lenders that are already ‘tuned in’ to the digital era. 

Speaking to the Financial Times, James Lloyd, EY’s financial technology and payments leader, described the problems which these new arrivals could have in making inroads within a well-serviced market. He said: “In practical terms, Singapore is already one of the best-served and heavily banked markets in the region. Converting mass-market customers to a new bank is going to be very challenging.” 

Zennon Kapron of Singapore-based consultants, Kapronasia is another industry figure to suggest that the technological advancement of the established Singapore banks could lessen digital banks’ immediate impact. He explained to the same publication: “If you use banks here in Singapore , you rarely need to visit the branch once you have joined. Many of the contenders are going to struggle to come to market with enough of will position to attract deposits and excite consumers”.

Not heart-warming news for the expectant license holders in Singapore, but these lenders could be attracted by emerging markets elsewhere in the South East Asia region.

That’s it from us this month. We will have more news and updates on the digital banking world for you in March.