Used car marketplace Carro is eyeing a wholesale digital banking license in Singapore to expand its business.
A car marketplace operator may not seem like a natural fit to apply for a digital banking license but it certainly does for Carro's profitable subsidiary, Genie Financial Services. The license can beef up its underwriting capabilities for automotive-related loans, said Carro's chief executive, Aaron Tan.
«A lot of times, when we finance end-car dealers, the risk is in not understanding their cash flow. But if we own a digital bank, we believe we can extract quite a bit of information from the car dealers. If they do deposits, their floor financing and hire purchases from us, we will have a very good view, internally, of whether the account conduct is fine and lower our risk of default,» said Tan, who was quoted in the «Business Times»(behind paywall).
Other Applicants
The startup is already in talks with potential partners to apply for the license, which could open the door to SME lending, Tan added. He cites Silicon Valley Bank, which provides banking services to startups in the US, as a model Genie could emulate.
«A license will allow us to do a lot more; for one, we will be able to unlock unsecured loans. Two, it legitimizes our ambition to move beyond just the car vertical… The part that I'm very excited about is banking new-age businesses like startups. This is where we think the future of a company like this should lie,» Tan said. The startup operates its used car marketplace in Singapore, Indonesia, and Thailand, and recently invested $30 million in a Malaysian peer.
Scaling Up
Currently, Genie provides loans and insurance services to car dealers and car buyers, along with technology platforms for dealers to manage their stock financing and loan origination. It has a small headcount of 13 and is headed by Helen Neo, a former senior executive vice-president at Maybank and head of personal financial services at HL Bank.
Genie more than tripled its net profit from the previous year to over S$3 million, on the back of over S$7 million in revenue for the financial year ended March 2019, Neo revealed. She attributes the unit's substantial margins to a sticky customer base, as well as banks' support in providing capital.
Getting Funded
«Initially we struggled a bit, as we had to rely on VC funds (for lending). But after we were more engaged in the business, we managed to convince the banks to lend to us… Now, we've got at least two banks giving us full support. Today, our (credit) lines with the banks are more than S$80 million,» she said. Carro is backed by Insignia, Softbank Ventures Asia and EDBI, the investment arm of the Singapore Economic Development Board, among other investors. It has raised some US$108 million in venture funding thus far.
Carro's move comes amid a few expressions of interest from other local startups. Peer-to-peer-lender Validus Capital is in talks with OCBC, Keppel Corporation, and Vertex Ventures to form a digital bank consortium. However, fintech Nium (formerly Instarem), one of the first startups to raise its hand to signal interest in a digital banking license, this week said it would no longer proceed to apply for one.
