Singapore's digital banks get 2023 report card, miss profitability mark

In The Top Up this week, we look at Singapore’s digital banking progress and dive into Indonesia’s P2P lending data. [Read from your browser]( The Top Up 🛒 Welcome to The Top Up! Delivered every fortnight via email and through the Tech in Asia website, this free newsletter breaks down the biggest stories and trends in fintech. If you’re not a subscriber, get access by [registering here]( IN FOCUS In today's newsletter, we look at: - How Singapore’s five digital banks [stacked up against each other]( in 2023 - Foreign lenders, the cornerstone of Indonesia’s P2P lending sector - How a Chinese insurtech firm expanded to Southeast Asia by [acquiring]( a Vietnam-based firm --------------------------------------------------------------- Hello {NAME} Bank BTPN’s Jenius is a pioneer in Indonesia’s digital banking industry, being the first to launch in 2016. While the sector is considered young in the country, it’s even younger in neighboring Singapore, where the first digital bank was established in 2022. Given their infancy, none of Singapore’s digital banks have achieved profitability, as my colleague Simon highlights in this week’s Big Story. In 2023, the combined revenue of the city-state’s five digital banks was US$72 million, which is just 6% of what South Korea’s KakaoBank generated in the same year. One way for Singapore’s digital banks to turn profitable is by extending more loans and charging a higher interest on these products than the interest they pay on deposits. In both areas, Trust Bank seems to be one step ahead: It has attracted the most deposits and disbursed the most loans compared to its peers GLDB, Anext, GXS Bank, and MariBank. Meanwhile, I delve into the foreign funds being channeled into Indonesia’s peer-to-peer lending space in this week’s Hot Take. As of April, the sector grew 4% to hit US$655 million. But these numbers aren’t at their highest despite the increase, indicating further growth is possible. -- Budi --------------------------------------------------------------- THE BIG STORIES 1️⃣ [No profit, no problem: Singapore’s digital banks in 6 charts]( If South Korea’s KakaoBank is the benchmark, Singapore’s digital banks still have some ways to go. 2️⃣ [China’s Huize targets SEA market with Vietnamese insurtech acquisition]( The Chinese company plans more M&A in markets like Indonesia and the Philippines to meet rising demand for digital insurance.  --------------------------------------------------------------- THE HOT TAKE Foreign lenders put their money where their mouth is - in Indonesia’s P2P lending sector Here’s what happened: - Indonesia’s Financial Services Authority (OJK) [reported]( that as of April, total outstanding funds from foreign lenders channeled through local P2P fintech firms grew by 4.3% year on year, reaching 10.7 trillion rupiah (US$655 million). - The Indonesian Joint Funding Fintech Association (AFPI) [stated]( this data demonstrates foreign lenders’ continued interest in the sector. - There’s room to grow, and local P2P fintech firms should do more to attract interest from foreign lenders, AFPI said. Here’s our take: The April 2024 figures are a slight improvement from the year before, but they are not the highest the industry has seen in the past year. In October 2023, OJK reported that P2P fintech received 11.4 trillion rupiah (US$695 million) in outstanding funds from foreign lenders. In the months after that, however, monthly figures have consistently hovered below 11 trillion rupiah (US$671 million). The foreign funds are also much lower than those originating from domestic lenders, which have seen more significant increases during the same period. Outstanding loans from domestic lenders reached 52 trillion rupiah (US$3.2 billion) in April 2024, jumping from 40 trillion rupiah (US$2.4 billion) the previous year. Nevertheless, the steady inflows from both foreign and domestic lenders suggest that Indonesia’s P2P lending sector stays resilient despite the challenges faced by many industry players. Among those hurdles are high default rates, which propelled OJK to [impose limits]( such as lowering the maximum interest rates that these platforms could charge customers and threatening to curb institutional lending from banks to P2P lending firms. As notable names like Investree, Tanifund, iGrow, and Modal Rakyat deal with [repayment troubles]( [concerns]( around how this might drive individual lenders away from these platforms cropped up. Yet in April, the industry logged the highest number of domestic individual lenders in the past year at around 316,000, indicating that such fears may have been overblown. The number of local banking lenders supporting P2P platforms also remained steady at around 14,000 since September, OJK noted. This could also explain the stable inflow of foreign funds into the sector recently. In fact, after three consecutive months of being in the red, the P2P sector finally reported positive net income in April, reaching 172.8 billion rupiah (US$10.6 million), according to OJK. The sector also posted a 2.79% rate of overdue loans lasting up to 90 days, the lowest compared to the preceding 11 months. Foreign investors are continuing to back local platforms, too. Case in point: Amartha, a P2P lender that focuses on women entrepreneurs, [secured US$17.5 million]( from US nonprofit Accion in June. The funding will support Amartha’s Southeast Asian expansion. Currency converted from Indonesian rupiah to US dollar: US$1 = 16,378 rupiah.  --------------------------------------------------------------- EVENTS HAPPENING You can also check out a curated list of trending tech events [over here]( and Tech in Asia’s signature events [here](. 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