Super Apps in Financial Services - Business Models and Opportunities

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Super Apps in Financial Services - Business Models and Opportunities
81
SECTOR BRIEFING

DBS Asian Insights
DBS Group Research • September 2019

                                             Super Apps in
                                         Financial Services
                                      Business Models and Opportunities
Super Apps in Financial Services - Business Models and Opportunities
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Super Apps in
Financial Services
Business Models and Opportunities

Sachin MITTAL
sachinmittal@dbs.com

LIM Rui Wen
ruiwenlim@dbs.com

Produced by:
Asian Insights Office • DBS Group Research

   go.dbs.com/research
   @dbsinsights
   asianinsights@dbs.com

Wen Nan Tan          Editor
Martin Tacchi        Art Director
Super Apps in Financial Services - Business Models and Opportunities
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04   Executive Summary

07   What are SuperApps?
     Features of a Game Changing SuperApp
     Potential Disruptors in Asia
     Proliferation of SuperApps
     Regulatory Risks of SuperApps

12   SuperApps: Implications on Financial Services
     Virtual Banks
     Robo-advisors
     Insurance

34   Ride-sharers in the Insurance Space
     Grab
     Go-Jek
     Didi

36   Looking Ahead: The Future for Traditional
     Players
     An Integrated Model: A Possible Road to Profitability

42   References
Super Apps in Financial Services - Business Models and Opportunities
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Executive Summary
                     The SuperApp phenomena began in China with Alibaba and Tencent positioning themselves
                     at the heart of China’s internet infrastructure. These Apps allow users to access several features
                     that would only be available through multiple apps and cross-sell to their large customer base.
                     Key feature of a SuperApp

                      Large user base with             Superior data analytics           Agility in working with
                     frequent engagement                                                       other players
                                                                                                          Source: DBS Bank

                     Ride-sharers’ search for profit in banking and
                     insurance via SuperApps
                     Despite strong potential for growth in the ride-sharing industry, major ride-sharers are
                     struggling to generate profits. Embracing a SuperApp approach is potentially the silver lining
                     to ride-sharers’ woes. Some inherent features of ride-sharers may qualify them to become
                     SuperApps in the future. Based on our proprietary framework, we attempt to identify which
                     popular apps are positioned well to qualify as SuperApps in their respective countries.

                     Potential SuperApps in Asia

                                                                                                         Source: DBS Bank
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                            In this report we explore whether popular Apps will take advantage of the sweet-spot they
                            are currently in, to emerge as SuperApps and what will be their impact in the banking and
                            insurance sectors?

                            How would the contest to become SuperApps
                            impact banking?
                            Popular Apps around the globe are exploring the possibility of venturing into financial services,
                            often starting off with digital wallets and payments. Success in mobile payments is a big factor
                            in determining the quality of consumer data while regulations is the other key variant. The
                            larger the percentage of unbanked population in the country, the bigger the opportunity.
                            That said, in markets with smaller unbanked population and more regulatory restrictions,
                            there are opportunities for incumbents to capture market share from others if they collaborate
                            with SuperApps to target their customers. New entrants looking to penetrate markets such
                            as Singapore and Hong Kong should also look at utilizing a more integrated banking model
                            which ventures beyond the traditional deposit taking and credit model, to successfully battle
                            well-established incumbents.

                            Indonesia, Philippines & Vietnam present huge potential with 60%-70% of
                            population being unbanked

                                                         Vietnam

                                                                                                                Source: DBS Bank

What should traditional banking players do in the face of the threat from SuperApps?
                                  How should the
                               incumbents respond?

Collaborate                             Retaliate                                   Co-Exist
Partner with the new entrants           Counter offers by the new                   Cede the niche markets to
if such partnerships expand             entrants aggressively and                   the new entrants to focus on
the addressable market of the           seek strategic alliances to                 digitisation and improving
incumbents                              expand into the niche market                service offering to your current
                                        segments                                    target market
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                     How would the contest to become SuperApps
                     impact insurance?
                     Much like the banking industry, the insurance industry in Indonesia and the Philippines
                     present large opportunity with >90% of population not having any insurance in place. The
                     big challenge for new players is mostly the lack of enough customer data and a distribution
                     channel accessible to a large chunk of the population. We believe some of the popular
                     SuperApps resolve these challenges by acting as digital distributors for new or existing insurers.

                     Indonesia, Thailand and Philippines Insurance Industry present big opportunities
                     for SuperApps

                                                                                                         Source: DBS Bank

                     What should traditional insurance players do
                     in the face of the threat from SuperApps?
                     Popular Apps are unlikely to cause major disruption in the insurance sector, given the inherent
                     difficulties in setting up insurance operations including risk management, regulatory approvals
                     etc. Partnering up with the popular Apps for the distribution of products might unlock a
                     substantial unserved market for the incumbents

                                                         How should the
                                                      incumbents respond?

                                                      Partner
                     Partnering up with the SuperApps for the distribution of insurance products
                      might unlock a substantial unserved/underserved market for insurance for
                                                  the incumbents.
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What are SuperApps?
      A Super Application (SuperApp) essentially allows users to access, on a single platform, separate
      features conventionally only available on different applications by building an ecosystem of
      seemingly unrelated services. WeChat is one such example which evolved from a simple
      messenger application to a SuperApp with functionalities across social media, banking, online
      shopping, food and grocery delivery, taxi hailing, healthcare, etc. Other examples include
      Alipay, PingAn and Go-Jek.

      SuperApps create an ecosystem surrounding its target audience, unearthing opportunities to
      cross-sell services and improve customer stickiness within the platform. They are often fairly
      difficult to create, requiring first a large mobile customer base and the need to aggregate a
      set of compelling and frequently used services.

      Tencent’s WeChat platform is one of the best known examples of a SuperApp

                  Content                                                E-Commerce

                                      WeChat Super-App
          Transport                                                          Financial Services

                                           Food Delivery

                                                                                  Source: Tencent, DBS Bank
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Features of a Game Changing SuperApp

Large user base with                  Superior data analytics                      Agility in working with
frequent engagement                   Customer Data Platforms                      other players
A Large user base attracts            provide a well-integrated 360                Openness for partnerships
partners easily while frequency       degree of each customer,                     and development of APIs to
of usage, makes the app top-          which was not possible few                   support easy on-boarding of
of-the-mind                           years ago                                    partners and minimise time-to-
                                                                                   market of new services
                                                                                                               Source: DBS Bank

                          1.      Large user base with frequent engagement

                                  SuperApps require a large base of customers that interact with the platform frequently
                                  to collect troves of customer data to support the marketing of other services, attract
                                  partners to its platform and amass sufficient demand for new services. SuperApps
                                  also have to be well integrated with the lives of the customers and have to be
                                  platforms that customers visit and use on a regular basis.

                          2.      Improvement in data analytics especially Customer Data Platforms (CDP)

                                  Developments in CDP bring together disparate data from customers into a single
                                  environment to provide a well-integrated 360 degree view of each individual
                                  customer. This was not possible few years ago when most companies adopted a
                                  more singular approach, targeting users based on IP addresses, with no additional
                                  information on age, sex or real time needs. While companies had access to a plethora
                                  of data, a true 360-degree view of customers was not available. This was so as first
                                  party data tend to focus only on specific customer needs served by the company.
                                  By offering services across different sectors, corporates can widen their view of the
                                  customer, thereby allowing them to successfully implement a CDP platform and gain
                                  insights into customers therefrom.

                          3.      Agility in working with other players

                                  Openness to form partnerships and willingness to share the platform and its customer
                                  base to other partners are essential features for the creation of Superapps. Availability
                                  of an ecosystem of Application Programming Interfaces (API) to allow communication
                                  between different platforms also remain essential for SuperApps. This would ease the
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     process of onboarding new partners, and lessen the time to market of new services.
     Openness of new technology players and developments in APIs have been critical for the
     success and evolution of SuperApps.

Distinctively, SuperApps that have emerged in China are predominantly mobile wallets. This is
driven by poor penetration of alternative payment mechanisms to cash (such as credit cards),
growing penetration of smartphones and a higher base of younger population. Mobile wallet
is likely to be one of the most frequently used ecosystem-platform by consumers in Asia.
Mobile wallet players also capture customer data about purchases across various sectors and
develop APIs to work with various players.

Key mobile wallet players in Asia

Philippines

Indonesia

Vietnam

China

Malaysia

Thailand

Singapore
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                     SuperApp Framework
                     Parameter          Definition                                          Criteria   Score
                     User Base & Engagement
                     User Base          Market reach (Market share or Customer Reach) in     >60%         6
                                        the country/region with core operations.            30-60%        4
                                                                                             >30%         2
                     High Engagement Mobile payments reach (No. of users as a % of           >60%         6
                                     customer base or population or estimated no. of        20-60%        4
                                     downloads as a % of target market reach.
                                                                                             5-20%        2
                                                                                              5         3
                                        developments through partnerships/JV etc.             2-5         2
                                                                                               100        3
                                        past 2 years                                         20-100       2
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                            SuperApps that leveraged on the myriad of factors to build out their platforms. This, however,
                            may not be the case elsewhere.

                            In developed markets like Singapore and Malaysia, there is a high likelihood for SuperApps to
                            emerge as different players focus on bundling services targeting different customer niches and
                            needs. For example, local telecom players are developing a utility-services focused ecosystem.
                            Regulators may also intervene in these markets to ensure that customer data is not held
                            hostage by a few dominant entities. This is to ensure that benefits of customer data and
                            analytics are more wide-spread across segments.

                            The landscape is somewhat different in developing markets as some popular applications
                            have already begun their transition to SuperApps. Go-Jek has positioned its platform as
                            an application for “all needs”. The ride sharer presently provides services that caters to
                            transportation, delivery and logistics and payment needs of customers. Further to which,
                            it also provides auto-mechanics and cleaning services. Competition for ride sharers from
                            banking, telecom and other customer-centric sectors remain fairly muted in many developing
                            markets. Regulatory restrictions on electronic data collection and protection are also in early
                            developmental stages.

Regulatory Risks of SuperApps
Data Protection & Information Privacy Regulations           Anti-trust Regulations

The principles behind Data Protection regulations           Anti-trust regulations promotes and enforces
require SuperApps to use data lawfully and                  market competition in order for consumers to
with transparency to ensure data integrity and              enjoy the benefits of competition such as lower
confidentially1                                             prices and market efficiency2

SuperApps collect large volumes of private data             SuperApps intend to become technological
from various participants3                                  behemoths in order to improve their bottom-line
                                                            performance
SuperApps run the risk of being targeted by
governments using Data Protection Regulations               SuperApps run the risk of being targeted under
if they use data beyond their defined purpose for           anti-trust regulation if they use their dominant
collection                                                  market position in one sector to gain market share
                                                            in another through unsustainable competitive
The European Union courts have seen over                    behaviors
200,000 cases under data protection regulations
already and fined over USD 50m4                             The roar of politicians towards using anti-trust
                                                            regulations against technology companies like
More than 120 countries have data protection                Apple, Google, Facebook and etc implies risk for
regulations and at least 30 others have data                SuperApps5
protection bills in their legislature along
international agreements for data protection6                                                                Source: DBS Bank
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SuperApps: Implications on
Financial Services
                     Virtual Banks

                     Popular applications around the globe are now starting to explore the possibility of venturing
                     into financial services. Often starting off with digital wallets and payments, popular
                     applications first gain access to valuable customer data, which they later combine with their
                     digital expertise to offer more lucrative financial solutions to customers.

                     Some examples of virtual banking entrants in the region include KBank, WeBank and MyBank.
                     Interestingly, they have also became profitable within 2 years of their launch, which naturally
                     poses a question on the opportunities for SuperApps in ASEAN.

                     We see at least four different business models for new entrants depending upon the
                     regulations and market competition. Based on our findings, we believe the banking sector
                     in Indonesia, Vietnam and Philippines are big opportunities for SuperApps. This is largely due
                     to the respective countries’ large unbanked population, ease of regulatory compliance and
                     availability of data.

                     Indonesia

                     Indonesia is home to a large share of the world’s unbanked and underbanked population,
                     due to difficulties in catering to the services required in a commercially feasible manner.
                     However, with the advancements in technology and smartphone, new entrants are looking to
                     capture this market share as costs of servicing these customers have been reduced drastically.
                     The country also has fairly lax regulatory restrictions in terms of data protection and a
                     correspondingly relaxed compliance requirement in the banking sector. In our view, this only
                     translates to potentially milder regulatory restrictions on virtual banks. The country’s low credit
                     card penetration and high uptake of mobile payments platforms further translate to easy data
                     access for aspiring SuperApps, making Indonesia’s banking sector rife for disruption.

                     Vietnam, Philippines and Thailand

                     Philippines & Vietnam are in a similar league, with large unbanked populations and relative
                     ease of data collection for SuperApps. Thailand also presents a great opportunity for aspiring
                     SuperApps.
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Singapore and Hong Kong

In contrast, the banking sectors in Singapore and Hong Kong present relatively small
opportunities for SuperApp disruption given tighter regulatory restrictions, smaller unbanked
populations and well developed payments ecosystems via formal banking channels.

That said, there are still opportunities for incumbents to capture market share from others if
they collaborate with SuperApps to target their customers. New entrants looking to penetrate
the Singapore and Hong Kong markets should look at utilizing a more integrated banking
model which ventures beyond the traditional deposit taking and credit model, to successfully
battle well-established incumbents.

Indonesia, Vietnam and Philippines present big opportunities for SuperApps in
ASEAN

                            Vietnam

                                                                                   Source: DBS Bank

In our assessment of opportunities for SuperApps in ASEAN, we factored in the percentage of
unbanked population in each country (represented by size of the bubble), ease of regulatory
compliance and availability of data to determine which markets in the region are most likely
to be disrupted.

To determine ease of regulatory compliance, we factored in the availability of data protection
regulations in the market, complexity of compliance with existing banking regulations, potential
regulatory complexity for virtual banks and the size of each country’s shadow economies.

To determine availability of data, we factored in current penetration rate of credit cards,
availability of a unified payments clearance platform that supports electronic fund transfers
on mobile platforms (eg. transfers to mobile numbers, email IDs, etc), penetration of mobile
payments platforms and the availability of SME data for aspiring SuperApps.

Low penetration of credit cards presents a great opportunity for mobile payments platforms
to flourish. On the other hand, the lack of a unified payment platform makes it difficult for
existing operators to effectively address customers’ need for mobile platforms.
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                              Grab seeks to build, buy or partner to create its own SuperApp

                              Build

                              Buy

                              Partner

                                                                                                             Source: DBS Bank

                              Business Models of Virtual Banks

                              We have identified four notable virtual banking business models in retail banking which are
                              functions of regulations and competition in their countries.

Business       Overview                                  Deposit taking         Lending and          Revenue Generation
Model                                                                           Financing
Digital        Functions like a traditional commercial   Deposits are           Data from the        Net Interest income
Commercial     bank, taking deposits from customers      primarily acquired     primary service      through interest
Bank           and providing financing solutions.        from customers.        of the entity (eg:   rate spread on
               Entity behind the bank is well-known,     Customers at           payment service      financing products
               paving way for easier attraction of       Kakao Bank can         provider, social     and deposits,
               deposits.                                 open an account        media platform)      Limited focus on
                                                         in 7 minutes vs.       is used to assess    service fees and
               Kakao Bank is owned by- Kakao Corp        20-30 at traditional   credit worthiness    commissions unlike
               (10% stake) and Korea Investment          banks. The bank        and repayment        traditional banks.
               Holdings (58% stake). Korea               had c. 17% of          capability.          Kakao Bank
               Investment Holdings brings banking        the country’s          Kakao Bank           managed to turn
               expertise while Kakao Corp operates       population as its      uses data from       profitable within
               Kakao Talk and Kakao Pay, the most        customers by 1Q19      Kakao pay and        just 18-months of
               popular messenger app and a digital       (18 months since       government record    operation.
               wallet in South Korea.                    launch).               to provide loan
                                                                                approvals within a
                                                                                minute.
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Business      Overview                                   Deposit taking         Lending and            Revenue Generation
Model                                                                           Financing
Digital       Functions primarily as an online           Customer deposits      Loans are              Two sources - Net
Distributor   distributor of finance products on         are focused on to a    underwritten by        Interest income and
Bank          behalf of traditional banks. Collection    lesser degree either   traditional banks      commission fees
              of deposits and on-balance sheet           due to regulatory      leveraging their       from traditional
              financing is focused on to a lesser        restrictions or lack   balance sheets.        banks. WeBank
              degree. WeBank in China, backed            of public trust.       On balance sheet       became profitable
              by Tencent, focuses on disbursing          Retail deposits at     financing is focused   within two years
              personal loans via WeChat with c. 80%      WeBank accounted       on to a much lesser    of its launch.
              of the loans underwritten by 50-60         for just 7% of its     degree. WeBank         Net income from
              financial institutions in the locality     liabilities in 2017    primarily works        commissions was
              of the borrower. WeBank had over           due to regulatory      as the platform        c. 34% of the total
              60m customers as of 2017 (~4% of           restrictions on        providing credit       income.
              China’s population) and managed to         transaction volume     assessment, loan
              get well ahead of major Chinese city       and deposit for        disbursement and
              commercial banks in terms of the retail    virtual banks.         collection on behalf
              loan portfolio, within just two years of                          of the lender.
              operations.
Digital       Focuses primarily on the provision of      Customer deposits      Loans are financed     Mainly net interest
Alternative   financing solutions, with loan funding     are focused on to a    through alternative    income. MyBank
financed      largely derived through alternative        lesser degree either   financing channels,    turned profitable
Bank          financing means other than customer        due to regulatory      including interbank    within 1.5 years of
              deposits. MyBank in China, backed by       restrictions or lack   borrowings and         launch. MyBank
              Alibaba, funds c. 60% of loans through     of public trust.       securitization.        generated a net
              in the interbank market.MyBank             Retail deposits at     Interbank funding      interest margin
              already caters to over 6m SMEs in          MyBank accounted       sources accounted      (on total assets) of
              China, representing over half the 11m      for just 34% of its    for c. 60% of          4.7% vs. 5.4% for
              SMEs in China.                             liabilities in 2017    MyBank’s total         WeBank.
                                                         due to regulatory      liabilities in 2017.
                                                         restrictions.
Digital bank  Functions similar to the commercial        Deposits are           Uses technology        Net Interest
plus software banking model. The bank further            acquired from          and data analytics     income through
provider      extends its offerings by running           customers. Any         to provide loans to    interest rate spread
              marketplace or by offering white-          funding shortfall      customers.             between loans and
              labeled banking products. Starling         is financed                                   deposits, Earns
              Bank in the UK, functions as a mobile-     through interbank                             commissions, service
              only commercial bank and operates          borrowings.                                   fees or revenue
              a marketplace offering a range of                                                        shares for product
              products like accounting software and                                                    sales offered via the
              Wealth management products.                                                              marketplace or on
                                                                                                       the white-labeled
                                                                                                       banking products.
                                                                                                                Source: DBS Bank
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                     1. Digital Commercial Bank

                        Operating like any traditional commercial bank, a virtual bank rakes in customer deposits
                        and uses them to provide loans to customers, profiting from the net interest spread.

                        Kakao Bank in South Korea is an example of a virtual bank operating under this model.
                        The bank is backed by Korea Investment Holding, a leading financial services provider
                        and Kakao Corporation, a media and technology company in South Korea, famous
                        for its “Kakao Talk” messenger and social media app, used by c. 85% of the South
                        Korean population7.

                        Launched in 2017, Kakao Bank, the second virtual bank in South Korea, managed to
                        attract over 2mn customers in a fortnight, securing KRW1tn (US$930mn) in savings and
                        providing KRW770bn (US$701mn) in loans8. Kakao Bank caters to over 17% of the
                        South Korean population and presently has over KRW 14.9tn in deposits9 (US$12.6bn).

                        To put this into context, MyBank in China managed to accumulate only US$3.6bn in
                        deposits over a longer two-year time frame10. Kakao Bank managed to turn profitable
                        within just 18-months of operation, turning in a profit of KRW 6.6bn (US$5.6mn) in 1Q19.

                        A large part of the success of Kakao Bank can be attributed to two key reasons.

                              i.    Kakao Bank was backed by well-known, established players in
                              		    the country

                        			         Korea Investment Holdings and Kakao Corporation was instrumental in
                           		       bringing public trust.

                              ii.   Access to customer data and high-tech nature of the bank

                                    Backing of Kakao Corporation provided the back with access to extensive
                                    social media and payments data of customers, which Kakao Bank could
                                    then use for credit assessments and the bank’s operations. The bank
                                    reduced the time taken to on-board customers to just 7 minutes vs. 20-30
                                    at traditional banks11.

                     2. Digital Distributor Bank

                        Under this model (made famous by WeBank in China), the virtual bank primarily
                        functions as a distributor of financial products on behalf of traditional financial
                        institutions. The bank is typically backed by a player with strong technological
                        capabilities and access to customer data. The virtual bank also operates as a
                        commercial bank but a substantial proportion of their lending is underwritten by
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   traditional financial institutions. On top of net interest margins, the virtual bank
   earns commissions and servicing fees for the services it provides to traditional banks.

   Regulatory restrictions in China impose restrictions on fund transfers to other banks
   and daily transaction limits of deposit accounts that have not undergone on-site
   verification at a physical bank branch. This makes it difficult for virtual banks in China
   to rake in customer deposits to finance their loan portfolios.

   WeBank, backed by Tencent in China, primarily focuses on the disposition of personal
   financing solutions via its WeChat social media platform. c. 80% of the bank’s
   loans are underwritten by c. 50-60 financial institutions12 that are in the locality
   of the borrower, with WeBank primarily working as the platform providing credit
   assessment, loan disbursement and collection on behalf of the lender.

   WeBank managed to generate a profit within two years of its launch and registered
   a net profit of US$209mn in 2017 (RMB 1.5bn). Net income from handling fees and
   commissions for the facilitation of loans on behalf of other lenders accounted for c.
   34% of the bank’s total revenue. This model works well in markets where securing
   retail deposit is difficult due to the lack of trust or regulatory barriers. The model,
   however, limits the upside potential of new entrants in the long run

3. Digital Alternative financed Bank

   Similar to the distributor banking model, the alternative financing model is typically
   practiced in regulatory environments where restrictions surrounding the collection
   of deposits make it difficult for virtual banks to raise funding. Under the alternative
   financing model, the bank may turn to sources of funding like interbank borrowings
   or securitization of assets to finance its operations. Profitability of this model tends
   to be lower comparative to other models, as the cost of funding is typically higher.

   MyBank in China operates under this model, with c. 60% of its liabilities comprising of
   inter-bank borrowings. The bank, with the backing of the e-commerce giant Alibaba,
   concentrates on the provision of loans to SMEs, who are typically underserved in the
   Chinese market. With limited access to retail deposits, the bank funds a large portion
   of its loans through interbank borrowings and the issuance of asset backed securities.
   Retail deposits accounted for just 34% of MyBank’s total liabilities13. Relatively higher
   rates on SME borrowings may have prompted MyBank to opt for more expensive
   interbank funding sources. MyBank generated a net interest margin (on total assets)
   of 4.7% vs. 5.4% for WeBank.

4. Digital bank plus software provider

   Further to operating like traditional commercial banks, these banks also offer their
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                         platforms to other service providers. Platform banks may operate marketplaces,
                         paving way for other service providers to leverage the bank’s customer base and offer
                         other integrated services or white-labeled banking products. It essentially allows non-
                         banking users to leverage on the bank’s banking expertise, license and technology.
                         Apart from generating net interest income, platform banks also enjoy commissions,
                         service fees or revenue shares for product sales offered via the marketplace or sale of
                         white-labeled banking products.

                         One such example is Starling bank in the UK. Starling bank, launched in 2014,
                         is a mobile-only virtual bank in the UK with over 460,000 retail and 30,000 SME
                         customer accounts. The bank offers a range of accounts including chequing and
                         savings accounts for retail customers and business accounts for partnerships and
                         sole-proprietorships. The bank also maintains the “Starling Marketplace”, providing
                         a range of solutions including wealth management products for retail customers
                         and accounting software and tax advisory solutions for SMEs. Starling bank plans
                         to further extend the marketplace with the inclusion of insurance and financing
                         solutions for customers.

                         Fidor Bank in Germany, a virtual bank launched in 2009, on top of operating a
                         marketplace, focuses on extending its services by offering a Banking-as-a-Service
                         product. The product allows non-banking players to roll-out banking products,
                         utilizing the banking platform of Fidor bank. Fidor bank provides its banking
                         expertise, banking license in the EU, technology and regulatory compliance allowing
                         non-banking players to launch banking products such as current accounts, bank
                         cards, payment platforms and credit products under the branding of the non-
                         banking player.

                     Lending Capabilities of Virtual Banks

                     In general, many SuperApps have easy-to-navigate user interface with positive reviews
                     for their user experience (UX). Putting credit underwriting capabilities aside, SuperApp
                     aspirants should seek to re-shape the lending scene in two key ways:

                     1. Expand target segment to underbanked SMEs and unbanked retail customers

                     2. Attract existing banked customers by offering higher speed and convenience, on top
                        of the SuperApp’s other lifestyle functionalities

                     We think an incumbent should be better off by leveraging on its existing database with
                     faster and more convenient loan processing to defend its existing customer base.
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Expand target segment to underbanked SMEs and                   Attract banked customers with higher speed,
unbanked retail customers                                       convenience and personalised services

Unbanked retail customers and underbanked SMEs                  New entrants would seek to re-shape current retail lending
would be the key focus of new entrants.                         through faster loan processing and fully-digitised applications

New entrants who possess transactional data on unbanked         For these customers, banks are ahead as banks possess
customers and SMEs can better evaluate the credit worthiness    more data of these customers. Licensed new entrants can
of these customers vs banks who typically possess no data of    also access the risk data through credit bureaus but that may
these customers.                                                not be as quick and comprehensive.

For unbanked and underbanked customers, tech players            Offer an integrated personalised statement on banking and
have a clear competitive edge over the banks in assessing       non-banking transactions
lending capability.
                                                                Disruption to the existing banks would be high as the
Disruption to the existing banks would be low as the            new entrants would be targeting the same set of customers
new entrants would be targeting a new set of customers
                                                                Faster loan processing and user-friendly platforms help
MYBank leveraged transactional data from Alibaba                HDFC win market share
platform to build a loan portfolio c. US$ 130bn in 3 years
                                                                HDFC bank in India digitized its credit approval process to
MYBank leverages data from Alibaba’s e-commerce platform        minimise human interventions and reduce the time take to
to provide credit solutions to SMEs operating on Alibaba’s      grant credit approvals and disbursement in 10 seconds in
e-commerce platform. MYBank caters to 6m SMEs, roughly          from May 2015 onwards compared to the industry standard
half of all SMEs in China. MYBank offers competitive interest   of several days. The bank digitized most of its documentation
rates ranging from 6-16% vs. 20-40% charged by traditional      requirements and linked its systems with the Aadhaar
players. MYBank approves close to 60% of loan requests          identification system. 10-second loans accounted for nearly
and boasts a default rate of c. 1% much lower than that         one-third of the total loans by 2018 with delinquency rates
of traditional players. MyBank, for example, uses network       on-par with loans disbursed physically.
analysis of transactions, through data gathered from the
AliPay and other sources, to evaluate if an entrepreneur        HDFC has gained 3.1% market share of retail banking
separates personal funds from business funds, one of the key    revenue over the past five years.
elements that drive credit worthiness of SMEs.
                                                                Convenience and personalised services

                                                                Grab has started sending out personalised monthly
                                                                transaction statements to users, which captures non-banking
                                                                transactions such as Grab rides, GrabFood orders and
                                                                Grabpay transactions. Virtual banking operator Monzo in the
                                                                UK categorises a user’s expenditure into segments such as
                                                                clothes, groceries, entertainment and transport and has most
                                                                recently partnered with fintech startup Flux to deliver digital
                                                                receipts into its banking app across various merchants
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                         Assessing Creditworthiness Using Transaction and Risk Data

                         An important component of the lending business is the individuals that these virtual banks are
                         lending to. The amount of loans that can be disbursed to a borrower is often determined by
                         the individual’s credit worthiness.

                         Traditional banks have been relying on inhouse historical data to assess borrowers’ credit risk.
                         For individuals, these data include salary, cash holdings, debt repayment history amongst
                         others. For corporates, financial profile, debt, valuation of collateral, industry outlook are also
                         taken in to consideration.

                         However, one might argue that risk data available accumulated are often retrospective – only
                         pointing towards existing and historical financial conditions of a borrower. Unfortunately,
                         these data points do not provide any useful insights towards the future financial standing of
                         individuals and corporates.

                         This is set to change with the proliferation of virtual banks due to the availability of transaction
                         data, which tend to be more forward looking. Technology giants typically have access to
                         transaction data derived through e-wallets, e-commerce operations, etc. In certain cases, non-
                         financial data on demographics, live locations and contacts details are also captured at the
                         point of loan disbursement.

                         For example, a borrower’s locations or “check-ins” are being monitored and can be used to
                         determine if an under banked worker has been reporting for work on time (and hence having
                         the financial means to repay the loan that he has taken up). Said borrower’s communication
                         and contact details can also be used to map credit risk – a borrower can be deemed to be
                         more credit unworthy or bears higher default risk if the individual has been communicating
                         frequently with other credit facilities.

                         Balancing forward looking transactional data with historical risk data

                                    Transaction Data, coupled                                        Collected only
                                    with advanced analytics allows                                 over the last few
                                    tech giants to better assess                                  years and does not
                                    the repayment ability of their                                cover the change in
                                    customer base                                                   behavior during
                                                                                                     an economic
                                                                                                      downturn

 Points only towards                Risk Data, points towards the
the existing financial              existing financial conditions of
  conditions of the                 the borrower
      borrower

                                                                                                               Source: DBS Bank
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That said, the volume of transaction data available is relatively sparse due to the relative
“newness” of virtual banks. Furthermore, transaction data alone is not sufficient for credit
assessment – the absence of financial data disallows technology giants to model the repayment
ability of the borrowers. Coupled with the fact that transaction data has only been collected
over the last five to six years, where the world was experiencing healthy economic growth, it
is hard to ascertain borrower behaviour during an economic downturn.

An example of a technology giant that successfully harnessed the power of transaction and
risk data is Tencent’s WeBank. Beyond transaction data, WeBank’s distributor banking model
allows it to access risk data of borrowers, enabling it to make sound and holistic decisions
for disbursing loans to its customers. Beyond risk analytics, data collected can also be used in
credit pricing decisions, effectively shortening the lending process significantly.

The distributor banking model
allows WeBank to access risk
data of customers that were
previously not covered by banks
or credit bureaus

WITHOUT

taking on the risk of default on
those customers, as loans are
usually disbursed by traditional
financial institutions.
                                                                                    Source: DBS Bank

Regulatory considerations in Hong Kong and Singapore

The emergence of various fintech companies around the world has redefined what it means
to be a bank. In the past, traditional banks associated themselves as the intermediary to
payments systems, deposits and lending, all while offering credit cards and other banking
and capital markets solutions. With the proliferation of the internet, banking transactions
are moving online. This inevitably puts into question the need for a physical branch network.

China has been a forerunner in the virtual banking space, having issued five licenses since
2014. This allowed digital banks to provide loans to small businesses and consumers, but with
strict limitations on accepting deposits.

In 2014, Korea gave an initial approval for its first two virtual banks. More recently, the Hong
Kong Monetary Authority (HKMA) and Monetary Authority of Singapore (MAS) both set up
various guidelines and frameworks for virtual banks in 2018 and 2019 respectively.
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                               While critics are of the view that Hong Kong’s licensing criteria is somewhat restrictive, we
                               believe there are some common considerations for Hong Kong and Singapore regulators.

                               Foremost, both regulators are keen on financial inclusion, and a potential benefit for virtual
                               banks would be its ability to help promote the cause. This is so as virtual banks generally target
                               the unmet or undeserved needs of retail and SMEs segment.

                               Secondly, virtual banks would need to strike a balance between building market share and
                               delivering a reasonable return on assets and equity. This stems from concerns on predatory
                               tactics which may affect the stability of the banking sector. In Singapore’s case, MAS has
                               stated explicitly that it will not allow any bank, digital or not, to engage in value-destructive
                               competition to gain market share.

                               Based on the above, it may be an appropriate conclusion to draw that regulators in Asia
                               are primarily focused on the financial stability of the systems, and hence systematic risk and
                               impact on incumbents caused by new players.

Considerations Hong Kong                                     Singapore
Definition      A virtual bank is defined as a bank which    N/A
                primarily delivers retail banking services
                through the internet or other forms of
                electronic channels instead of physical
                branches.
Scope           Both financial firms (including existing     In addition to any digital banks that the Singapore banking
                banks in Hong Kong) and non-financial        groups may establish under the existing internet banking
                firms (including technology companies)       framework introduced in 2000, new digital banking licences
                may apply to own and operate a virtual       are extended to non-bank players.
                bank in Hong Kong.
No. of licenses 8 licenses have already been issued.         A maximum of 5 licenses with two full-service commercial
                More applications for licenses are under     banking licenses and three wholesale banking licenses.
                consideration.
Ownership       Should be locally incorporated.              Digital full bank licenses are available only to companies
                                                             headquartered in Singapore and controlled by
                 An entity with >50% ownership should        Singaporeans.
                 be a bank or a financial institution
                 (if not, the bank should be held by         Wholesale banking licenses are open to both local and
                 an intermediate holding company             foreign companies.
                 incorporated in Hong Kong).
Operational      None. Not expected to maintain physical     Digital banks will commence as restricted digital full banks
restrictions     branches and should not impose any          and be subject to various deposit caps, business restrictions
                 minimum account balance requirement         and a lower minimum paid-up capital in its initial one to
                 or low-balance fees on customers.           two years; no prescribed time period in which restricted
                                                             digital full bank must graduate to digital full bank.

                                                             No access to automated teller machines or cash deposit
                                                             machines network though allowed to offer cashback services
                                                             through electronic funds transfer at point of sale (EFTPOS)
                                                             terminals at retail merchants.
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Considerations Hong Kong                                   Singapore
Deposit taking None                                        Restricted stage for digital full banks: Aggregate deposit
restrictions                                               cap of S$50m with an individual deposit cap of S$75,000.
                                                           Deposits can only be secured from business partners, staff
                                                           and related parties.

                                                           Wholesale banks: Can accept fixed deposits upwards of
                                                           S$250,000 from individuals. Free to open and maintain
                                                           business deposit accounts for SMEs and corporates.
Product        None                                        Restricted digital full bank: At entry point, can offer only
restrictions                                               simple, banking operations in not more than 2 overseas
                                                           market. Upon progression, no business restrictions after
                                                           meeting MAS’ criteria.

                                                           Wholesale banks: Can only serve SMEs and other non-retail
                                                           segments.
Capital and    Minimum capital requirement for             Initial paid-up capital for restricted digital full bank: S$15m
liquidity      licensed banks: HK$300m.
requirements                                             Paid-up capital for digital full bank: S$1.5bn.
               Virtual banks must maintain adequate
               capital commensurate with the nature      Both restricted and digital full bank are subject to similar
               of their operations and the banking risks capital requirements as local banks. Restricted full bank
               they are undertaking.                     needs to maintain liquidity of 16% of minimum liquid
                                                         assets, thereafter, subject to similar liquidity requirements as
                                                         local bank.
                                                                                                                Source: DBS Bank

                             Robo-advisors

                             Historically, new entrants draw liquid investments away from banks due to temporary
                             loopholes or lack of regulations. In 1980s and 1990s, US and UK brokers took advantage of
                             liberalisation of financial regulations by sweeping client money into funds.

                             Fast forward to today, SuperApp aspirants have several options when looking into launching
                             investment products. This range from offering money market products that resemble
                             traditional retail deposit accounts (Eg. Yue Bao) or Robo-advisory services.

                             Robo-advisory services is a great fit for many customers with simple investment needs, especially
                             so for the underbanked and unbanked population of ASEAN. However, its value proposition,
                             which is based on low-cost and transparency, limits the providers’ ability to generate fees.
                             Furthermore, low entry barriers have resulted in many start-ups entering the space, driving up
                             the acquisition cost per client. These challenges are particularly pronounced in ASEAN, each
                             with its own set of regulations while being a fraction of the size of the European or US market.
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                     Examples of Robo-advisors in Singapore

                     Robo advisor Assets                                            Min. balance Fees
                     StashAway    19+ ETFs including government,                    None         0.2 to 0.8%
                                  corporate bonds, US Equities, Small-                           depending
                                  cap Growth index funds, Consumer                               on amount
                                  Staple Equities, Asia ex-Japan
                                  Equities, gold, etc.
                     Smartly      20+ ETFs in equities, government                  S$50            0.5 to 1%
                                  and corporate bonds, commodities,                                 depending
                                  real estate and cash                                              on amount
                     AutoWealth More than 8,000 stocks and 600                      S$3,000         0.5% per
                                  government bonds from US, Europe,                                 year + US$18
                                  APAC and Emerging Markets.                                        per year
                                                                                                   Source: Moneysmart.sg

                     Profitability of Robo-advisors

                     According to Morningstar14, Robo-advisors spend c. US$300 on a gross basis acquiring each
                     client account. It can take as long as a decade in some instances for Robo-advisors to recover
                     the cost through fees, considering the 0.2% to 0.5% fees charged.

                     Three things significantly weigh on the profitability of robo-advisors:

                     1. High client acquisition costs

                     2. Ongoing costs of servicing clients

                     3. Low revenue yield on client assets

                     Gaining visibility among customers and converting potential leads to customer accounts
                     remains one of the hardest and most expensive tasks for emerging Robo-advisors.

                     Bulk of the seed funding raised in the initial stages of operations is invested in customer
                     acquisitions. Costs dedicated to customer acquisitions account for a large proportion of
                     the operating expenses Robo-advisory firms. This large capital outlay delays the path to
                     profitability. WealthFront is one an example of an established Robo-advisor which has yet to
                     record profits since its inception in 2008.

                     Size of client accounts are likely smaller in Singapore than in the US, where two of the largest
                     Robo-adivsors, Betterment and WealthFront, claimed average account sizes of between
                     US$20,000 to US$40,000. However, client acquisition expenses are should technically be
                     lower in Singapore as well given the smaller market size.

                     Based on a hypothetical assumption below, a Robo-advisor could take at least 3 years to
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recover its average client acquisition cost (CAC). This is three time the ideal time of a year. In
order to be profitable within a year, it is imperative that either the fees charged be at least 1%
of the investment or CAC be significantly lower for each customer.

•   Average client account size: S$10,000

•   Average lifetime value (LTV) of customer: S$150
    (assuming 0.5% of the investment amount over 3-years)

•   Average client acquisition cost (CAC): S$150
    (at a c. 50% discount to CAC in the US)

Case Study: Yu’e Bao

Yu’e Bao was first set up as a repository for leftover cash that was temporarily stored in Alipay
wallets, and has since surpassed JPMorgan’s US government money market fund in 2Q17 to
become the world’s largest money market fund with $166bn under management. Since then,
Yu’e Bao’s assets under management rose to $240bn in 4Q17.

The success of Yu’e Bao hinged on two factors. By sweeping the money into a fund, Ant
Financial offered returns of up to 6.8% in 2014, higher than the prevailing savings interest
rate (0.35%). Another factor was the ambiguity in regulations which allowed Ant Financial to
avoid the requirement of parking 20% of funds as reserves with the central bank.

                After realising Yu’e Bao’s disruptive power, regulator imposed
                20% reserve requirement in 2017, subsequently raised to
                50% in 2018. Also, there are individual quota requirements
                and daily caps in place for Yue’Bao investments crackdowns

                Yu’e bao currently offers a return of c. 2.3% by investing in
                money-market funds versus 0.35% savings rate

                The negative impact on the banking industry is insignificant.
                Fund size shrank to 0.5% of total banking deposits in March
                2019
                                                                                    Source: DBS Bank
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                     Insurance
                     Digitalisation of Insurance

                     Backed by SoftBank’s ambitions, ride-sharers around the world are exploring opportunities in
                     the traditional insurance services industry. While Softbank itself is not a technology firm, it is
                     a major investor in technology-based insurance disruptors. Between 2017 and 2018 alone,
                     SoftBank backed China’s largest online insurer ZhongAn, India’s biggest online insurance seller
                     Policybazaar, as well as US home insurer Lemonade.

                     Softbank sees the insurance sector as ripe for disruption and believes in the immense potential
                     of cross selling between these “insurtechs” and other firms within its portfolio such as Grab,
                     Didi and Uber. While Softbank and its portfolio of ride-sharers may be the first to venture into
                     the insurance industry, it is definitely not the last. Other non-SoftBank backed ride-sharers such
                     as Go-Jek are also making in-roads into insurance through equity investments in “insurtechs”.

                     Mainstream Adoption
                     Looming end-to-end digitisation for insurance companies

                                                             15% adoption rate -
                                                             tipping point of
                                                             mainstream adoption
                                                                                                      Digital distribution to become
                                                                                                      a common functionality among
                                                                                                      insurance players by 2020
                                                                                                      (adoption in 2016 – 17%)

                     Mainstream adoption fully-
                     digital claims processing
                     likely by 2020 with growing
                     cross-sector partnerships                           Automated usage based
                     (adoption in 2016 – 7%)                             pricing to reach the tipping
                                                                         point by late-2019, with
                                                                         improvements in real-time data
                                                                         collection and analytics
                                                                         (adoption in 2016 – 10%)

                         Adoption rates are based on the % of innovations in the insurtech space. All data is for the Property and casualty segment.
                                                                                                                        Sources: McKinsey, DBS Bank

                     To determine which markets in the region are most likely to be disrupted via SuperApps, we
                     have factored in the percentage of uninsured population in each country (represented by size
                     of the bubble), concentration of the insurance industry in each country and the availability of
                     data for SuperApps.
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Indonesia, Thailand and Philippines Insurance Industry rife for disruption by
SuperApps

                                                                                   Source: DBS Bank

In our X-Axis we try to rank the countries based on the concentration of the insurance market
based on the number of firms and their share of the total insurance market (life and general
separately). In Malaysia, life insurance market is highly concentrated with the top 5 insurers,
accounting for c. 80% of Gross Written Premium (GWP). On the other hand, the Indonesian
general insurance market is highly fragmented, with the top 5 insurers only accounting for c.
35% of GWP.

In our opinion, concentrated markets in general are better suited for disruption since they
offer higher profit opportunities allowing exploitation of pricing inefficiencies by new
entrants. Concentrated markets generally offer higher profit making opportunities with listed
incumbents recording higher margins. Although there is a notable exception in Singapore,
where United Overseas Insurance Ltd had a bumper year in 2018.

Concentrated markets typically post better profitability

Country           FY18 Average Pre-tax Profit Margin
Indonesia                       12%
Singapore                            27%
Malaysia                             9%
Thailand                             7%
Philippines                          7%
China                                4%
Hong Kong                            1%
                                                                           Source: Reuters, DBS Bank
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                             That said, it should also be noted that market concentration in isolation may not be a good
                             indication of profit making potential for new entrants. Indonesia is a prime example of the
                             opposite; where market fragmentation enables future disruption with a largely uninsured
                             population and the archipelago nature of the country, which prevents incumbents from
                             establishing strong agent networks.

                             Similar to our previous analysis on availability of data for the banking sector, we use credit
                             card penetration and pervasiveness of mobile payments platforms as metrics in our Y-Axis.

                             Our analysis suggests that the insurance industry in Indonesia, Thailand and the Philippines
                             are ripe for disruption by SuperApps. They provide better opportunities than developed
                             economies such as Singapore and Hong Kong due to their respective low barriers to
                             entry. In addition, ASEAN countries like Indonesia and Philippines are highly prone to
                             natural disasters, political and economic instability and a high level of sectarian violence.
                             Coverage for the above are presently not met by the incumbent insurers which could
                             also provide a niche for SuperApps. Unlike banking, Government-funded social insurance
                             leaves relatively smaller opportunities in Vietnam.

Potential entry points to insurance industry

                                                 Insurance Services

      Product design/     Product pricing           Underwriting/              Distribution              Policy claims
       Development                                risk management                                        management

                                                                                               Automotive

     Potential for
        entry                                                                                     Travel
         High

      Moderate                                                                                    Home

         Low
                                                                                                  Health

                                                                                                   SME

                                                                                                              Source: DBS Bank
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                               Insurance Distribution Models
Business       Overview                     Distribution of insurance   Underwriting and Claims     Profitability and Revenue
Model                                       products                    processing                  generation
Digital       Functions like a              Nature of insurance         Risk assessment takes       A significant portion of
Insurer       traditional insurer           products vary with the      place via digital means     the premium income
              in a selected sector          insurer’s backers and       and leverages partner’s     however, has to be
              (more common in P&C           focus of the insurer.       data. Handling of claims    shared with ecosystem
              and Health). Insurer’s        Policies are largely        happens online to a         partners. For example,
              products are usually          distributed via digital     great degree albeit         ZhongAn is yet to
              distributed through           channels. For example,      offline channels are        generate profit since its
              its ecosystem partners.       shipping return             also used. For example,     launch in 2014. c. 30% of
              For example, ZhongAn          policies on e-commerce      ZhongAn’s policies on       ZhongAn’s net premiums
              operates with the             platforms, flight delays    flight cancellations take   are shared with its
              backing of Alibaba,           and event cancellations     into account weather        ecosystems partners.
              Tencent and Ping An           on travel platforms         data, airline history,
              (c. 33% combined              are popular policies by     airport history etc.
              ownership). ZhongAn           ZhongAn.                    Shipping returns policy
              caters to six consumer                                    is offered on partner
              centric ecosystems with                                   channels.
              five major ecosystem
              partners.
Insurance     These are aggregators         They are purely             Does not get involved in    Revenue from lead
Aggregator of insurance plans and           distributors of insurance   insurance underwriting      generation for the
              serves as a marketplace       products. Policybazaar      and claims processing       insurers, advertising
              for policies. For example,    portal is an exclusive      but facilitates the         and policy sales. In the
              Policybazaar is an online     insurance focused           registration of claims on   case of Policybazaar, c.
              platform that aggregates      e-commerce website          behalf of its clients.      85% of FY18 revenues
              insurance plans and           with c. 50% market                                      came from policy sales.
              serves as a marketplace       share in online insurance                               Policybazaar’s FY18
              for policies, offering        distribution space In                                   revenue was US$22m
              more than 250 insurance       India.                                                  with US$1.3m loss.
              plans from over 50
              insurance brands on its
              platform.
Orchestrator Generally, these are           The orchestrator            Insurance policies are      Direct revenues from
led Insurance large orchestrators           distributes the insurance   underwritten and            commissions and service
              with a loyal customer         products on behalf of       managed by the insurer’s    fees on premiums.
              base, who select              the insurer and provides    partners while the          Orchestrators also enjoy
              exclusive partners to         targeted marketing          distributor manages         indirect benefits such
              join their ecosystems.        for insurance policies.     the client relationship     as improved customer
              The orchestrator              Insurers benefit from       for enquiries and claims    stickiness, opportunities
              helps in the insurance        access to a wider           processing.                 to cross-sell and up-
              discovery, while              customer base. WeSure                                   sell core products
              insurance providers           for example, takes                                      etc. WeSure primarily
              underwrite and manage         1.5-2 months and 7-8                                    generates income
              the insurance product.        iterations to develop a                                 through commission fees.
              WeSure by Tencent, has        product with partners.
              partnered with over 20        c. 50% of customers on
              insurance providers to        WeSure are likely to
              offer insurance policies      recommend insurance
              covering health, auto,        policies to friends who
              life, and travel and caters   are 2-3x more likely to
              to over 20mn customers.       purchase the policies
                                            recommended.
                                                                                                                  Source: DBS Bank
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                     Digital Insurer

                     Digital insurers function like any typical traditional insurance provider, except its emphasis
                     on digitalizing its operations. In the current landscape, digital insurers are typically either a
                     subsidiary of a pre-existing insurance provider or are backed by a strong set of industry partners
                     with good technical backgrounds, customer data access and expertise in insurance.

                     Digital insurers maintain an end-to-end digital platform, handling the process from lead
                     generation and underwriting to claims processing digitally. Risk assessment takes place via
                     digital means and leverages data shared by the customer with the insurer and any data
                     gathered from agreements with ecosystem partners.

                     Like traditional insurers, digital insurers generate revenue through premium and investment
                     income. However, operational expenses are not necessarily lower in this model as a significant
                     portion of the insurer’s revenue is shared with its partners facilitating the insurance process.

                     An example of a Digital Insurer is ZhongAn, the first online-only insurer specializing in Property
                     and Casualty insurance policies. ZhongAn is also backed by two technology giants and a leading
                     insurer in China – Alibaba, Tencent and Ping An. The three entities hold c. 33% ownership
                     stake and assists the company through the provision of technical support, access to customers,
                     insurance expertise and assistance in co-creating new insurance policies.

                     In terms of business strategy, ZhongAn mainly focuses on micro-premium and repetitive
                     insurance policies around six consumer-focused ecosystems (Health, Auto, Travel, Consumer
                     finance, Lifestyle consumption). ZhongAn’s insurance policies are also well integrated with its
                     partner ecosystems, which allows for easier distribution. For example, one of ZhongAn’s best-
                     selling shipping return policies is made available on e-commerce platforms such as Alibaba’s.
                     Another example of its integration with its partner ecosystems is ZhongAn’s insurance policy for
                     buyer and sellers to cover return shipping costs. This greatly alleviates Chinese buyers’ concerns
                     about product quality when they make purchases online.

                     As a Digital Insurer, ZhongAn has largely digitised its underwriting and claims management
                     process. Data analytics are used to personalise insurance policies and pricing to customers.
                     Claims are also largely digitised with certain policies carrying fully-automated claims processing.
                     For example, customers who purchase ZhongAn’s Flight Delay Policy are reimbursed
                     automatically into their WeChat Pay accounts if flights are delayed beyond certain amount of
                     time as specified in the policy.

                     Despite rapid growth in premiums it has underwritten, ZhongAn still remains unprofitable
                     as the insurer is still scaling up its platform in a bid to add new ecosystem partners to its
                     network. Despite acting purely as a digital insurer, ZhongAn shares c. 30% of its net premiums
                     underwritten with its ecosystem partners for distribution and customer access. This is largely
                     in-line with c. 40% channel fees paid by Brick and Motor insurance players in China.
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