StanChart, Atome in US$500m financing deal
In what appears to be the first bank-fintech BNPL tie-up in the region, this partnership will initially include BNPL services and later expand to include digital lending products.
In an industry first, Standard Chartered (StanChart) will provide US$500 million in financing to Singapore-based "buy now, pay later" (BNPL) fintech Atome Financial, under a new 10-year partnership to be rolled out in Indonesia, Malaysia, Singapore and Vietnam in the next few months.
This tie-up will initially include BNPL services and later expand to include digital-lending products, said StanChart and Atome in a joint statement on Wednesday (Oct 13).
It aims to reach over 16 million customers in Asia by 2025 and gain access to multiple financial ecosystems to capture a share of the digital-lending market - estimated to be valued at US$92 billion by 2025 in South-east Asia alone.
Unlike banks, BNPL players generally take a lighter-touch approach in evaluating credit-worthiness, which means no credit checks, debt discussions and payslip requirements, among others. While convenient for consumers, it arguably raises credit risk for the fintechs.
Dewi Rengganis, analyst at Frost & Sullivan, told The Business Times that StanChart will be able to offer its credit-scoring capabilities on Atome's platform to improve overall risk management.
"A challenging part of BNPL service is the due-diligence process or eKYC that need big data to assess a customer's credit risk and worthiness. With the partnership, Atome can utilise data points from StanChart and conduct more comprehensive customer assessment," she said.
Maybank Kim Eng research head Thilan Wickramasinghe noted that traditional banks carry deep reservoirs of data on credit behaviour, credit scoring and asset quality management, while fintechs have to build these analytics from ground up.
"Partnerships such as these can provide win-win solutions for banks - by expanding their addressable market - and fintechs - through sharpening their credit algorithms," he told BT.
Banks will also be able to stem the leakage of fee income from areas such as credit card instalment schemes, cash management and transaction banking, arenas where fintechs are aggressively competing.
"In certain jurisdictions, large retailers have partnered with BNPL providers even though credit card companies have launched instalment payment options. Banks may thus not want to leave any gap in the evolving payment ecosystem," said Jefferies analyst Krishna Guha.
On the regulatory front, there may be room for regulatory arbitrage if different rules apply to BNPL providers and banks, he noted.
Singapore's BNPL sector is still largely unregulated, though the Monetary Authority of Singapore has said it is reviewing the appropriate regulatory approach for such schemes amid concerns over unseen debt.
Allen Sng, a Sheridan fellow at the National University of Singapore Faculty of Law, told BT that banks can provide liquidity to BNPL startups to accelerate their product offerings.
While the incumbents have the money and manpower to build competing products, most "struggle to think or move like a lean startup". Getting a rival product into the market could take at least a year for a traditional bank, which could be too late, said Stephen Tracy, chief operating officer at Milieu Insight.
"While banks gain access to a rapidly growing market of consumers that isn't addressable by their existing credit and lending products, BNPL providers gain greater access to merchants through the banks' existing partnerships. That, and given how fast-growing this sector is, partnering with a traditional bank may offer BNPL providers some cover against fierce competition in this space," he added.
As with any new disruptive product or service, the BNPL scene is bound for rapid changes as key players grow, pivot, merge, dissolve, or get acquired by other companies.
"Partnerships like this could be very beneficial for the BNPL providers in terms of giving them a wealth of knowledge around how they streamline and scale their operations," Tracy told BT.
Industry watchers are expecting more bank-fintech tie-ups in the coming months, as firms race to capture the Asia-Pacific's US$210 billion payments revenue opportunity.
"It makes commercial sense for banks to partner or even acquire such startups to bolster their offerings for customers. I would expect more banks to do the same," said NUS' Sng.
The region's payments sector is poised for a quick return to a healthy 6 to 7 per cent growth rates this year, with fresh opportunities for incumbents and new entrants to participate in emerging adjacent revenue streams, said a recent McKinsey report.
Those that do not adapt their strategies - whether by choice, inaction, or lack of investment capacity - are likely to endure below-peer growth and risk being displaced on key customer experiences.
Maybank's Wickramasinghe said fintechs with scalable business models that offer complementary services or new customer segments would increasingly look to collaborate with traditional banks.
Meanwhile, Singapore banks have been investing heavily in their technology platform, so "we cannot rule out an increasing pace of collaborations with fintechs", he added.
Overall, the banking sector is primed for more disruption in the coming years as new digital entities emerge.
"BNPL is part of this, but it's only one of the many factors that are driving banks to rethink their offerings and ways of doing business. Much like how a company like Grab evolved from just ride-sharing to a super app, I think we'll see a similar evolution from some, if not many banks in the coming years," said Tracy.
In its statement, StanChart said its funding will enable Atome to grow and connect a wider ecosystem of merchants to a larger customer base, improving product access and financial inclusion for consumers across the region. At the same time, Atome's customers will gain access to more innovative financial services via their mobile devices.
Atome Financial - which comprises BNPL platform Atome and digital-lending platform Kredit Pintar in Indonesia - is a business unit under Advance Intelligence Group, which recently closed a US$400 million Series D financing round from a consortium led by SoftBank Vision Fund 2 and Warburg Pincus, valuing the company at more than US$2 billion.
StanChart said the latest partnership marks one of its largest strategic investments in a fintech to date. It supports the bank's ambition to expand its reach and scale within the mass market segment via a digital-first approach, underpinned by digital acquisition and new partnership models.
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