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Abu Dhabi, UAETuesday 22 October 2019

Old-school Singapore lender seeks virtual banking licence

Hong Leong Finance, which still uses faxes in its application process, is looking to team up with a FinTech to reinvent itself
Ang Tang Chor, president of Hong Leong Finance, has more than 40 years of banking experience under his belt. Hong Leong plans to apply for one of up to five virtual bank licenses to be granted by the Monetary Authority of Singapore. Photo: Bloomberg

Singapore’s Hong Leong Finance sees the country’s plan to issue virtual banking licenses as an opportunity to find new customers and reinvent itself as a tech-savvy lender.

The firm, founded in 1961, has been in talks with financial-technology companies about a joint application for one of the licenses, according to president Ang Tang Chor. It wants to find a partner that will help it apply technology to its lending decisions, with a view to doing more business with millennials and newly established firms.

“We have the customer base, we have the reach but we don’t have the platform,” Mr Ang, 70, said in an interview.

The Monetary Authority of Singapore announced plans earlier this year to grant up to five virtual bank licenses to FinTechs and other nonbank firms in a bid to introduce more competition into its financial industry. Applications for the retail and wholesale licenses are due by the end of the year.

About 70 per cent of Hong Leong’s loan book is made up of advances to small and medium-sized businesses in areas such as property development, food and beverage and logistics, with lending to retail customers accounting for the rest.

Mr Ang said Hong Leong requires potential borrowers to provide a history of financial information before approving new loans, and this can be a problem for some individuals and many smaller firms. By tying up with a tech firm to seek a virtual license, Hong Leong hopes to learn how to sift new data sets, such as real-time information on company invoices, or individuals’ credit card records and social media posts.

“The FinTechs have one advantage: they lend against data,” Mr Ang said. “That is now slowly becoming more and more important to financial institutions” which have traditionally used other criteria such as company balance sheets, he added.

The financing landscape in Singapore is dominated by traditional lenders and banks, and “perhaps the gap that virtual banks can fill is loans of smaller quantum,” said DBS Bank analyst Rui Wen Lim, who has a buy rating on the stock. Digital bank aspirants want to tie up with technology companies that can potentially develop software to track the real-time data on the financial position of small and medium businesses, added Kok Weng Sam, financial services leader at PwC Singapore.

The firm, which still uses faxes in parts of its application process, is also looking to revamp in other ways, such as by introducing payment cards for expatriate workers, and instant credit risk assessments for car loans.

With a market capitalisation of S$1.2 billion (Dh321 million), Hong Leong held total deposits of S$11.9bn as of June 30.

Mr Ang declined to name the tech firms he has been talking to, though he said some are reluctant to enter tie-ups because they want to submit solo applications. But in any case, Hong Leong needs to adapt if it is to appeal to younger clients, he said.

“The next generation of depositors and clients are going to be people who are tech-savvy so we will have to go in that direction,” Mr Ang said.

Updated: September 14, 2019 09:43 AM