GXS Bank planning for investment product even as Grab discontinues such offerings
SINGAPORE – An investment product is on the cards for Grab and Singtel’s digital lender GXS, even as tech giant Grab recently discontinued such services here.
GXS retail head Jenn Ong told The Straits Times that GXS Bank sees a market for a simple, low-risk product that invests in assets such as bonds.
This comes months after Grab pulled the plug on micro-investment products AutoInvest and Earn+, and said it was winding down GrabInvest as the business would not be commercially viable.
Rolling out investments will allow GXS, which debuted in August 2022, to earn fee income at a time when banks’ uplift from high interest rates is fading.
Ms Ong said: “While we appeal to more people now, I still feel it’s important that we don’t lose focus of catering to thinly-served and underserved customers, and those who are new to the workforce.
“These people will need some form of an investment product. We want to put it in their hands.”
GXS currently offers a savings account, debit card and personal loan. In comparison, peer MariBank, backed by Sea, offers a savings and investment account for individual customers, as well as a business account and loan.
GXS said on April 3 that it has disbursed more than 100,000 loans since it launched its FlexiLoan about a year ago. It is aiming to double this volume within the next six months.
Customers have taken out loans of $2,700 to $3,000 on average, said Ms Ong, with the average amount growing by 30 per cent in the past six months.
FlexiLoan amounts begin at $200 and go up to a maximum of $100,000, while tenors range from two months to five years.
Starting small gives the bank room to increase the funds borrowers can access after they have shown that they can make regular payments over a period of time, said Ms Ong.
More than half of the customers who have taken up the loans do so for emergencies such as urgent medical bills and replacing household appliances, she said. Gig workers have also used the loan to cover some expenses while waiting for their pay to come in.
The bank sees more opportunities among customers whom Ms Ong calls “mass, mass affluent”, or those earning between $30,000 and $50,000 a year.
This comes even as it continues to cater to people who earn less than that and might be underserved as they lack a credit score. The FlexiLoan is available to those with a minimum annual income of $20,000, subject to other non-income criteria such as age.
“We’re also seeing people earning $100,000 and above who are coming to us as well... It shows that the product meets the purpose of various segments in Singapore,” said Ms Ong.
Interest on the loan is calculated daily, so when borrowers make an early repayment, the following day’s interest is calculated based on the reduced outstanding balance. FlexiLoan customers have cumulatively saved $4 million in interest so far, said GXS.
The bank is exploring having a feature within the loan which allows for “very, very short-term financing” for more affluent customers who need to access funds only for several days, said Ms Ong.
“A lot of these customers are savvy and know how to use short-term financing for their needs, so they’re not risky,” she said.
Asked about defaults, she said the bank’s non-performing loan (NPL) number is “lower than” the industry’s. The NPL ratios of incumbent banks DBS, OCBC and UOB ranged from 1 per cent to 1.5 per cent in the fourth quarter of 2023.
“It may be premature to say (our number is lower) because the loan book has not matured, but it’s showing a very good trend,” said Ms Ong.
In addition to Credit Bureau scores, GXS assesses risk by using ecosystem data from Grab and Singtel. For example, if the bank notices that a customer has often failed to pay his phone bills on time, it might charge him a higher interest rate on his loan to cover the increased risk.
Its target to grow the loan book comes amid macroeconomic uncertainty and high interest rates that have resulted in muted demand for loans in the industry.
Ms Ong said that customers will nonetheless continue to need financing, and noted that the bank considers their disposable incomes and ability to make monthly repayments when granting credit limits.
GXS previously told ST that it is building its micro, small and medium-sized enterprise banking business, and will start serving such firms in 2024. This will also help to drive demand for the bank’s retail products, said Ms Ong.
Noting that FlexiLoan customers already include those who run their own businesses, she said: “Even if we underwrite based on a business document, we can also give them a loan on a personal basis. Now that you’re our customer in the business banking world, the rates will be preferential. So I think we’ll have more levers to pull.”
On April 3, the bank unveiled a campaign where eligible FlexiLoan customers can win prizes like an iPhone 15 with a complimentary one-year Singtel plan, in a lucky draw that runs until June 30.
GXS is also building up its customer deposits, which are a cheap source of funds for banks. In July 2023, it opened its savings account to more customers and raised the deposit cap from $5,000 to $75,000 per account.
The lender was previously subject to a $50 million regulatory cap on retail deposits for digital full banks – those that cater to both retail and non-retail customers – and is still under an undisclosed cap that is being progressively increased.
Customer deposits in GXS Bank and Malaysian counterpart GXBank, which was launched in November 2023, stood at US$374 million (S$505 million) as at the end of last year.
Ang, P. (2024, April 2). GXS Bank planning for investment product even as Grab discontinues such offerings. The Straits Times. https://www.straitstimes.com/business/gxs-bank-planning-for-investment-product-even-as-grab-discontinues-such-offerings