PETALING JAYA: Life could become uncomfortable for conventional banks if Grab ventures into digital banking, according to economists Yeah Kim Leng of Sunway University and Carmelo Ferlito of the Institute for Democracy and Economic Affairs.
Commenting on reports that the Singapore-based company may be close to applying for a digital banking licence in its home country, they said Malaysian banks would be watching developments closely.
If it were to obtain the licence, they told FMT, local banks would be bracing for the eventual expansion of its banking business into Malaysia.
“Malaysian banks are well aware of the threats and disruption posed by financial technology,” Yeah said. “Given Grab’s local presence, its entry into the Singaporean banking industry and the implications will be closely followed and scrutinised.
“Having a digital banking licence will certainly enable Grab to leverage its technological capabilities to incorporate selective banking and financial services into its offerings.
“This will force conventional banks to become more innovative and accelerate their digital transformation plans.”
Customers would benefit, he added.
Ferlito sees Grab’s plan as another step in the direction of brand consolidation and recognition.
Founded as a ride-hailing company in 2012, Grab has since ventured into the food delivery and digital wallet businesses, and is now valued at an estimated US$14 billion.
Ferlito said he expected the company to try to expand the banking venture outside Singapore if it worked well there.
He said the digital bank could become supportive of the ride-sharing business but Grab would have to work on building trust among bank customers.
Yeah said he would not be surprised by Grab’s move into digital banking, given the low cost of operating without physical branches and the potential for efficiency afforded by advancements in artificial intelligence and blockchain technology.
He said the entry of digital banks into the market was just a matter of time and would be determined only by the readiness of authorities to regulate the business and the ability of players to prove that the benefits outweigh the risks.
However, he said there was a need to ensure the conventional bank business models were not eroded to the point of becoming unsustainable because these banks were still handling the bulk of savings and doing most of the lending.
“If these are disrupted and tech companies cannot fill those roles, our financial system will be at risk of collapse,” he added.