SMB Issues: Digital Banking - What does it mean for you?

Note: This feature was first published on 14 July 2022.

Digital banking in Singapore refers to more than just the use of an app to perform banking functions.

At the end of 2020, the Monetary Authority of Singapore (MAS) announced it had awarded four new digital bank licenses of which two were Digital Full Bank (DFB) licenses, and another two being Digital Wholesale Bank (DWB) Licenses

The difference between them was that a DFB will be allowed to take deposits from and provide banking services to retail and non-retail customer segments. A DWB however, will be allowed to take deposits from and provide banking services to Small and Medium Businesses (SMBs) and other non-retail customer segments.

Ant Group which won a DWB formed ANEXT Bank, a digital wholesale bank incorporated in Singapore. As a DWB, the Singapore-based digital bank will focus on providing digital financial services to local and regional micro, small, and medium businesses, especially those engaging in what it calls “cross-border operations for growth and global expansion”.

Toh Su Mei, the Chief Executive Officer of ANEXT Bank said:

We believe it’s time to offer the next generation of financial services that are accessible and effortless for growing businesses. Amid rapid acceleration in the digital economy, business models are changing and pivoting to become digital-first, if not adopting a hybrid model. Financial services have to evolve and be where SMBs are doing their businesses digitally.

To better understand what digital banking means for local SMBs and the type of services and support they can expect from ANEXT Bank, we spoke to Toh to find out more.

You received the digital wholesale banking licence, who are your target customers? How would a digital bank operate differently from traditional banks (such as investment or retail banks)? How would a digital bank serve the target segment better? [A1] 

Incorporated in Singapore, ANEXT Bank is the newest digital wholesale bank operated under the licence issued by the Monetary Authority of Singapore.

As a digital wholesale bank, we focus on providing innovative and secure digital financial services to local and regional micro, small and medium enterprises, especially those engaging in cross-border operations for growth and global expansion.

We believe that this segment is currently still unserved or underserved.

• There are micro, small and medium enterprises whose financing needs have not been met.
  According to IFC, SMEs are less likely to be able to obtain bank loans than large firms; instead, they rely on internal funds, or cash from friends and family, to launch and initially run their enterprises. 
  There is a US$320 billion SMB funding gap throughout Southeast Asia today, meaning that about 51% of the region's SMBs are currently underserved[1]. 
• The “unserved and underserved” also include businesses who have pivoted their business models to hybrid and digital-first, but their need of accessing financial services digitally where they do businesses have not been met.
  According to a Deloitte research paper, small businesses account for more than 85% of cross-border e-commerce marketing in the Asia Pacific region[2].

Business models are evolving towards hybrid and digital-first, and so should financial services. Financial services have to evolve and be where SMBs are doing their businesses digitally.

The beauty of being a digital bank is that we can provide next-generation digital financial services that are innovative, accessible and effortless, and provide it where businesses are digitally located.

What verticals are you looking at to start? Cashflow often breaks many SMBs, how can you help them here?

We are open to serving micro, small and medium enterprises of all sectors, especially those engaging in cross-border operations for growth and global expansion.

During the soft launch and the start of our operation, we will focus on engaging SMBs, easing them in on the journey to adopt digital financial services, while building trust.

• At the current soft launch stage, we have introduced the ANEXT Business Account, a dual-currency deposit account with proprietary security measures including three-factor authentication verification as well as features such as remote onboarding and daily interest.
• We are the first bank in Singapore to offer remote virtual onboarding for business owners who are based overseas but have registered business in Singapore. With this feature, business owners do not have to travel to Singapore to open an account. This allows them to save a lot of time, expense, and hassle.

We also recognise what's next starts by understanding the needs of SMBs - which is why we're calling all SMBs to tell us via our website - together with our roadmap, we will use those insights to ensure we serve the needs well.

Moving forward, we plan to roll out more financial services to meet SMBs’ other financing needs.

As a digital bank, is ANEXT Bank subject to the same regulations as traditional banks?

Same as traditional banks, digital banks in Singapore must meet the regulatory requirements by MAS. ANEXT Bank is always in the mode of continuous innovation and improvement especially around enabling a frictionless customer experience and protecting customers' data through collaborations with regulators and industry partners.

What will Ant Group's role be in any of this?

Leveraging Ant Group’s deep bench of technologies and know-how, along with the bank’s customer-obsessed local team dedicated to serving the SMB community, ANEXT Bank is best positioned to live up to the vision of offering the next generation of financial services that are accessible and effortless for growing businesses.

How does the partnership with Proxtera work?

Proxtera’s commitment is to simplify global trade for SMBs and uplift them with the power of networks, leveraging modern technology to improve the discoverability, accessibility, availability and affordability of innovative digital services, which include trade financing solutions.  

This mission is closely aligned with ANEXT Bank’s focus to serve SMBs engaging in cross-border operations.

The partnership will see both organisations jointly create and establish an open framework for all participating financial institutions as they provide financing and risk mitigation support for SMBs and platforms in global trades. ANEXT Bank will also be Proxtera’s first participating digital wholesale bank in Singapore to lead the way in providing financing solutions to the buyers and sellers on Proxtera’s network.

ANEXT Bank’s vision and focus is to be where SMBs are doing their business digitally and we welcome partners and work with them collaboratively to do so. Proxtera is one example of such partners.

Volt, a digital bank in Australia recently closed its doors. Is this a warning on the viability of digital banks and what lessons can we draw from it? 

The strategy and revenue model of each digital bank differs, so it is hard to simply draw the conclusion that Volt’s story is an indication of all digital banks’ outlook.  

Having said that, I think it is a reminder for players in the industry on the importance of having a sustainable business model.

Speaking for ANEXT Bank, I believe that we have identified the right segment to serve, and we strongly believe that inclusive and accessible digital financial services are what the SMEs need and are lack of now to grow and thrive.

What makes ANEXT Bank different is our approach to innovation: open, and customer-obsessed. This approach will allow us to innovate fast and innovate right.

Open:  

• We are committed to building an open ecosystem and working with financial institutions and industry partners to drive industrial transformation and even more value for these businesses. For example, we are the first participating digital wholesale bank in Singapore to provide financing solutions to buyers and sellers on the Proxtera network. Proxtera is an entity supported by the Monetary Authority of Singapore that empowers B2B eCommerce platforms with broader access to global trade and innovative digital solutions.

Customer-obsessed:

• We are the first bank in Singapore to offer remote virtual onboarding for business owners who are based overseas but have registered business in Singapore. With this feature, business owners do not have to travel to Singapore to open an account. This allows them to save a lot of time, expense, and hassle.
• We conduct regular focus group sessions with SMBs and potential customers to hear their painpoints and for them to share with us feedback.

 [1] Source: https://fintechnews.my/28764/financial-inclusion/rebooting-sme-banking-in-southeast-asia/#:~:text=According%20to%20the%20World%20Bank,by%20governments%20to%20contain%20outbreaks


[2] Source: https://www2.deloitte.com/cn/en/pages/technology-media-and-telecommunications/articles/deloitte-launches-technology-empowered-digital-trade-in-asia-pacific-report.html

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