The AIBP ASEAN B2B growth podcast is a series of fireside chats with business leaders in Southeast Asia focused on growth in the region. Topics discussed include business strategy, sales and marketing, enterprise technology and innovation.
Hello, and welcome to the AIBP ASEAN B2B growth podcast where we sit down with individuals responsible for driving growth of their businesses here in Southeast Asia. My name is Irza, and today I have a very interesting guest with me. Kelvin actually heads SC nexus, he will talk about it a little bit himself. SC nexus is a part of Standard Chartered
Bank. And in the past few episodes, we've talked about how financial services companies within Southeast Asia have developed and grown and evolved over the last 5, 10 years, with the digital banking environment hotting up quite a bit in this part of the world. I will leave Kelvin to briefly introduce himself. So Kelvin, please tell our listeners about yourself before you get into SC nexus.
Hi Irza. Thank you for inviting me onto this. Pleasure to be here. Well, what can I say about myself? It's been a really fun ride from a career standpoint, so far. My underlying mandate or mantra for career movements is really: what is the most interesting problem, and what is the most difficult to achieve. Let's try it. Right.
So if you look at it, I've been Standard Chartered 10 years but other than nexus, which has lasted the whole four years now, give or take, almost five, coming to the end of this year. Before that I was with Transaction Banking, I did payments for a while: did the Samsung pay, Apple Pay launches across multiple markets, and then I was in retail products globally for a bit. Even before Standard Chartered I was in all
over the place. I was in transaction banking, before that consulting, before the consumer FMCG, data analytics, and all the way to consumer finance at the very beginning of my career with OCBC in Indonesia. So effectively, all I've done is: okay, this thing looks difficult. It's not been tried before. I am totally unqualified to do this, and let's give it a shot. Effectively.
That's usually a good sign. When somebody says they're unqualified to do something and they pursue it, it's usually better than being a so called "expert". Right. Talk to us a little bit about SC nexus because I understand that's the team, or the business division that you are running, and how it sits within Standard Chartered as a bank.
Okay, so Standard Chartered nexus, sits within the Retail and SME bank as a business line. So what happened was four years ago, the exam question I was really trying to answer is how does Standard Chartered scale its retail and SME business without actually incurring the traditional costs of scaling. I mean, traditionally, for any retail SME bank, you would, you know, set up branches, have physical infrastructure, get sales, scale staff, go out,
acquire customers. But I mean, I guess in 2017, 2018, the world has changed, right, the emergence of the Super App ecosystems, the increasing demand of users, consumers and SMEs, to have banking at their
fingertips. And also obviously, DBS started the whole "Live more, Bank less" campaign got me thinking right, why wouldn't Standard Chartered, a global bank, with about 40 licenses around the world, create the skilled technical capability to white-label itself and offer via either API's or integrated app or STK or whatever number of options that are out there, to anyone who wants to become a bank, but doesn't want to go through the pain of becoming a
bank. Because, as most people know, and with the licenses that have been granted recently in Singapore and Malaysia, in order to actually become a proper bank, it is a long, painful, arduous process. You have to apply for license, it takes you a year, two years, the bill and the deployment takes you a year, two years. And that's just the basic cost of maybe up to $100 to $200 million dollars, depending on how you look at it.
And that doesn't include the regulatory capital you need to satisfy then now there is a path to profitability. It is a challenge to build a digital bank. And I think most people underestimate that challenge. So my view is, why would you want to do all that, if you were a
large digital ecosystem? Why wouldn't you work with a bank with a technical expertise, and the back end, and the historical experience in dealing with regulators and balance sheet management, to say: "Hey, you know what, I will just plug into you, use your license, use your balance sheet, make it invisible on the front end to my users", create significant use cases for stickier ecosystem, people use it more often visit, do more transactions on it, get more data, create seamless
experiences, much like you know, grab, for example, where you can leave the grab ride without actually having to initiate a payment because it's automatically deducted off your card. So all of that in a nutshell, to create scale. Right? It compensates what the
bank is historically poor at. In fact, all banks are pretty much historically poor at, which is profitable customer acquisition, and maintenance and servicing, while leveraging what the banks are traditionally good at, which is risk management, balance sheet management and regulatory engagement. So that in a nutshell is what we've done with Standard Chartered nexus and it's a four year journey, the platform is ready. It's in
production. In Indonesia, we have two partners that we've announced in Indonesia, Bukalapak and Sociolla. We are awaiting final regulatory approvals to open it up to the public. And I guess in the coming months, you'll hear a lot more not just from Indonesia, but from other markets as well.
That's very interesting, because I think Indonesia was one of the first markets you looked at. And traditionally, when you look at the Southeast Asian market, I mean, you've seen quite a few developments within the Digital Banking space. You have TONIK Bank in the Philippines, you have TNEX in Vietnam, the UOB's and DBS's of the world, UOB TMRW I think they first launched in Indonesia and Thailand. Obviously, those are pure
digital banks. Your offering is a little bit service, you call it banking-as-a-service, right? And walk me through for SC nexus, who are your main target customers, who will be using the platform? You're not targeting consumers directly are you?
No, so nexus is not a B2C business. It's a B2B2C business, or B2B2SME business. Effectively, we have two customers. The first one is our partner, we call them partners, such as E-commerce platform, basically any digital platform, with have a significant user base, both SME and consumers, who want to become a financial services provider without the pain of becoming a financial services provider. So those are our first level partners that we target to
integrate with. So Sociolla and Bukalapak are very good examples. We have a few more in the pipeline in Indonesia. And in fact, we have no lack of interested partners across the region, not just Southeast Asia, but across the network for Standard Chartered Bank. But we also have a second tier whereby the end consumers will also need to be catered to. We need to create products, in collaboration with the partners, That's two minutes thirty
seconds. So you're talking about that feeds the partners value proposition to the consumers, but also create economic value not just for the partners in the bank, but also for the
consumers. The reason we call it nexus actually, and this is a funny story, is that it is a confluence of interests that are being served both from a partner, the bank, the consumer and the regulatory perspective, because the regulators won't have to create a new regulatory framework to manage this business, given that the banks at the end of the day are the lender of record, balance sheet of record and, and the standardised regulatory requirements have all been
adhered to on the backend. From the consumers, and the SME standpoint, the data sharing between the partner and the bank creates significant use cases, both for onboarding, underwriting and servicing. Imagine, for example, if Irza, hypothetically speaking, had a Netflix bank account, right? Where you open the bank account powered by Standard Chartered Bank, and I know everything that has ever done on Netflix, may
not be a good thing. But everything that has ever done on Netflix, including what it purchases if any right? Would that change the way I onboard you? Have you already been KYC, to some extent, depending on the platform? So you can you can significantly alter the customer journey, and when we open it up to the public in Indonesia, with Bukalapak, hopefully very soon, you will see that we will also be the first in the market to have a completely
non-face-to-face process. No WhatsApp callback, no contact center calling you to verify your identity four hours after you've already filled in the form. Our average account opening time is at this point about three minutes. Our best is two minutes, thirty seconds. But that's a one off. I'm hoping to bring it down from three minutes to the average of two minutes thirty seconds. Hopefully. processing once all forms had been submitted on your part, or
on nexus part, correct? Or on Bukalapak's part? No, no, two minutes thrity seconds from when I click on open account, to account opened.
Wow. Okay, that I think solves a lot of problem, right? Because when we talk about financial services or digital financial services, especially here within Southeast Asia, you're looking at a very large population of unbanked people. But let's take the conversation back with regards to your partners you mentioned Bukalapak and Sociolla right?
What's the thought process behind a company like Bukalapak or any other companies who are looking to have additional banking arm, because for example, you've seen Grab do a lot of different things at this part of the world: they've applied for digital banking licenses, they've took stakes in this bank in Indonesia, what was it Grab or Gojek. So there's many different paths to actually be a financial services
provider. What's the difference between what you provide as a banking-as-a-service platform versus applying for a digital license? I know you mentioned RegCap. I know you mentioned, all the KYCs, plus the costs, the profitability problems, but in terms of timeline, can they shorten it by significant amount, what's the difference between going with nexus as a platform versus applying for a digital banking license?
If you're looking at purely timelines, the Singapore digital banking license was issued when - late the year before, end 2020, early 2021? It's been a year and a half, right? It's not up and running. Nothing has been in beta, I think some things are probably in beta, nothing is in public. Yeah, the timelines for my deployment in the country is nine to 12 months, from the signing of a contract to the platform moving into production
with at least one partner. The second partner, obviously will be faster, because once the platform is in production in the country. The second partner is actually I think the timeline will probably be about half that, and we are seeing that coming through anyway, in our experience in Indonesia. So from a timeline perspective, it is faster. Obviously, you give up some things. You have to work together with the bank in terms of creating the product. But then you also gain some things.
You are not under regulatory scrutiny, you don't have to do the RegCap and all the stuff that we talked about earlier. So there are benefits to that. And at the end benefit, which is why people want to move in financial services in the first place, is to create those stickier use cases for their core business. And also to ensure that you have access to a lot more data about your users.
So again, you mentioned your two partners, you mentioned the pipeline that you have. And you mentioned that, because this is a B2B2C platform, the people or your prospective customers are essentially businesses and looking at your two partners that you have onboarded out of Indonesia, these are digital native companies. Is that an area of focus for nexus and if I may ask, what are the geographies, the different countries, you are looking at currently?
So we have a few pieces of key criteria for both the partners and the countries. By and large, for the country, we need to have countries who have a regulatory environment that's conducive to digital banking, we need to have, hopefully, a strong Bureau and a digital ID system in the country. So that will facilitate for significant ease of onboarding and processing. From that perspective, there are quite a few markets in Asia, not just Southeast Asia that ticks
those boxes. Obviously, Indonesia is one with Dukcapil and so on, which is why we are there. And for sure, market size for Indonesia is huge. Malaysia is one obviously, Vietnam is coming on soon, the Philippines with its digital ID ambitions, I think this year or last year, Thailand, so those markets are of interest, and I talked about them earlier with regards to them also being in the pipeline.
Around the world, obviously, India is of significant interest, even though I think from a competitive standpoint it's going to be a challenge. But with Aadhaar and all of those systems in place should be relatively easy from a technical standpoint. So from partners angle, yes, digital native companies are great. We usually require an anchor partner in the country, with a large enough user base, for us to justify the investment in deploying the
stack into the country. And then the secondary partners or second, third, fourth, fifth partners are basically additions right, on top of the base business case. So for Indonesia's case, Bukalapak was first, Sociolla is second. Both are very good partners with us, and we work very closely with them. And in the other markets, we will pursue the same strategy because then that's how you actually create that ecosystem across multiple countries.
You see, the last two minutes, three minutes that you've been talking, Kelvin, you haven't been talking like a traditional consumer banker, right? You're talking about scaling a business, and I'd like to go back to how SC nexus sits within Standard Chartered again, you know, because when you started on this project, you were working within what the consumer division at Standard Chartered, digital payments, was it?
Yep. So when I came up with this idea, I was working on something in Singapore called "My Way". It's the digital savings proposition for people over 55 in Singapore. So I was working on that with obviously, the person who is now the CEO of the retail bank globally, Judy, and Pei Si, who is now the Grab Malaysia CEO designate. And we were doing that, I was doing that. And I came up with this idea at that point in time, and I basically pitched it to the CEO of the bank, Bill Winters, and Andy
Halford, the CFO. And long story short, got it funded and put into a separate piece and got us isolated so that we can deliver. And that's where we are today.
I think that's a question a lot when we speak to traditional, they don't like being called this traditional incumbent legacy banks. Nobody likes being called that anymore because it's not cool. But when we speak to these, I would call them incumbents, right? There's this problem with regards to how do they evolve as a bank, and when you talk about efficiency, you talked about profitable customer acquisition, within the
SME or consumer space. It's hard to be a bit more efficient, even with all the technology you have available. So what Standard Chartered has done, you have SC Ventures, you have nexus and Mox as well right the digital bank out of Hong Kong? Can you quickly walk through us the entire process across the last four or five years with regards to what it took internally for Standard Chartered as an incumbent bank, to come up with an entity like nexus today? You mentioned you had to pitch it to
the CEO. How much obstacles were there? How much pain points were there in actually getting this off the ground? I see you on LinkedIn, you're hiring so many people now, right? For for SC nexus. It's been, I'm sure a very interesting journey over the last four years. But what was required to take that shift from "Hey, you know what, let's just focus on building products for people over 55 years old" to "Hold on. I'm looking at banking-as-a-service platform". It's a massive change, right?
Yeah, absolutely. I mean, if we take it into context, Standard Chartered Bank has been incredibly progressive on that front. Obviously, we are not just putting money where our mouth is, in terms of building new business models with Mox, and nexus, and other things that we've announced, TASConnect, and a whole bunch of other stuff. SOLV, even crypto custodian in Zodia, in London, right. So a bunch of stuff that we've done.
Obviously, at the very beginning, from an individual's point of view, require a significant leap of faith in the idea, I had to give up my day job to take this leap of faith, as it was just me and five slides, and a coffee, with Bill, Judy and Andy, and so on. So significant leap of faith. But the bank has been very progressive in supporting this. And obviously, they funded. As with all banks, we go through multiple rounds of conversations
to get to the funding. But eventually we got funded, and we push, and we expanded and we built the platform. The last two years has actually been well, internally relatively smooth sailing right? After you get past the initial idea, people understand what you're trying to do, then the real challenge is actually hitting the timelines on the bill. Because most people underestimate what it takes to build something, really, to the standards required, to the security standards required, for
banking. So that that was actually the real obstacle. At the working level, obviously, you've always tried to convince people and some people will not be convinced purely because they have never seen anything else like this. I won't shy from the fact that I've had many conversations, where people say, in my thirty years of banking, never seen this thing that you're talking about, it will never work. Oh, it's just like, it's like a co-brand card, it will never work. We don't see
that kind of value. I mean, sometimes you will say in your thirty years of banking experience, you've led us to 2% market share.
I hope you didn't say that out loud.
I actually did that once, but not a great experience. No, the point is the bank has been extremely progressive, on that front, all things considered. And we are live, and we are up and running. And we are going multimarket, which we which is more than you can say for most banks. And if you look at LinkedIn, purely, every other bank is now started looking at banking-as-a-service, and embedded finance. DBS has started hiring for banking-as-a-service. HSBC has
announced something. Butif we didn't embarked on this journey four years ago, we wouldn't have anything at this point. So this has been an incredibly good journey, incredibly progressive from the bank, and the
leadership of the bank. And we are where we are, we are hoping to scale multimarket multi-partner, and make this the real engine of growth from a cost income ratio and return-on-equity perspective for the bank, and as well as for the partner, and create a new banking experience for consumers everywhere across our footprint in Asia, Africa and the Middle East.
Perfect. Well, how does in terms of organisation structure, talk about that for a little bit? Because I think for a lot of companies, there's been this ongoing discussion. I think you're very familiar with this right? Do I build a digital bank separate from my current bank or do I provide digital banking services which is not a digital bank? Right. So how is SC nexus organised in terms of within the larger picture of Standard Chartered?
Right? So as the Global Head of SC nexus, my responsibility and obligation for delivery goes to Judy, right. I report to Judy with regards to delivery of nexus in Indonesia, and soon in other countries that we are announcing. However, on that front, we are also thinking about creating the monetisation of the particular IP that we're building for Standard Chartered. So there is a composite, which is why from a reporting line standpoint, I am house in SC
Ventures. At some point, when there is scale and stability, we are looking to go out and help other smaller banks do this. Basically say look what we've done for Standard Chartered, we can help you do the same. So that's a conversation that we're having. But from an SC nexus perspective, not the Venture, not the spin-off, from a SC nexus perspective, it sits in the retail and SME bank, and I'm accountable to Judy Hsu, for delivery.
Okay. Okay, we're coming close to the end of this episode. Kelvin, but before I let you go, I noticed something right. Because for Standard Chartered, I believe the global HQ is out of Singapore, right? It used to be, I think, in Hong Kong, or London, and then it moved to Singapore quite some time ago. And within Singapore, I think you're very well aware. It's a hub for Southeast Asia. And you launched your first nexus partnerships within
Indonesia. When you look at geographic reach of Standard Chartered as a bank, and eventually nexus as well, you know, we touched on this a little bit just now, the markets that you find interesting, but what are the main factors you
look at? So for example, if I'm a digital native company sitting out of country X, what are the factors I should look at before I say, reach out to Kelvin and his team at Nexus to say, "Hey, you know what, I'm interested in a partnership, I'm interested to build my own digital banking ecosystem or using your platform", what are the factors they should be looking at?
Oh, it's very simple. Do you require a financial services capability to create the right use cases for a path to profitability for your user base? Assuming you've got a large user base of some sort. Do you want to do it yourself? Is the country that you're in going to supply digital banking licenses for you to bid? And would you be successful? And if not, would you acquire a bank to do so? Do you want to be a regulated entity that you have to answer to the local
regulators? And is the country's digital infrastructure both from an identity as well as a credit perspective up and running? If you can answer those questions, specifically, and the answer is, yes, I want to build financial services. Yes, I want to be stickier ecosystem. No, I don't actually want to do this myself, because it is super painful and super expensive, and will take forever to pay off. And yes, the
country is conducive to it. And most countries actually are increasingly so, then perhaps give us a call and explore the opportunity of using the Standard Chartered capability, nexus capability, with the license and the balance sheet of the bank. And, you know, you built your front end, and we will manage everything on the back end, and we come to some kind of a commercial agreement that works. Yeah, that's it.
That's really quite simple. And, at this point, we are entertaining 10s, well, 20, 30 conversations concurrently. Realistically, we will probably convert maybe less than 10% of those conversations, right? People will understand, oh, this works. This doesn't work. There's a pain point here. Because at the end of the day, if you deal with a bank, there will always be downsides. And there will always be upsides. You can go apply for a license
and have full autonomy. But then that will be a very fun conversation to be having with the regulations.
And it's a fairly new, the idea for non-bankers, banking-as-a-service is still a fairly new idea or new concept for a lot of people, right. Let's talk about final things. Let's talk about growth or metrics for nexus itself. You know, you mentioned you're working with quite a few partners, you have a pipeline. What are the metrics you're looking at, when you talk about growth over the next, I don't know, 1, 2, 5, 10 years?
I think internally for nexus is quite simple. Number of customers acquired, average balance sheet size of the customer, and number of, obviously, the repeat customer rates, and the number of transactions that they make, typical banking metrics, internally for nexus. But in collaboration with the partner, we also have a conversation around the number of customers who actually use the service on the partners' platform, and use the rewards that come with the service on the partners'
platform. So those conversations are ongoing in terms of defining those metrics. So from that perspective, we are trying to ensure that we support the value proposition of the partners and that's actually a key mantra that we do. So when they open up, you will see that the product set for Bukalapak, or Buka Tabungan, I can say the name of the Bukalapak bank is Buka Tabungan.
Which is savings in Bahasa right, Buka Tabungan?
That's right. Yeah. I can say it because they've actually put up an Instagram page. So it's public. Yeah, the product itself will support the use case to drive more users to actually go and purchase things on Bukalapak. I can't give you the details of what it is at this point, because it's not public. But that's the idea. So yeah. For those partners who think that way, who want to do this, and the metrics that we're looking at, are pretty standard.
Okay, but it's a balance of, you know, traditional banking metrics, you know, balance sheet utilisation, return on balance sheet usage. On top of that, you have metrics for your partners as well, or all your partners have their own metrics with regards to conversions, whether it actually drives more usage within the ecosystem, whether customers are stickier as well. And this is the data that will be shared between nexus and Bukalapak, as well?
Depending on regulatory approval. So for each use case, where the partner's data is with us is generally easier, to reshare data back with the partner, each used case has to be defined, and has to go to the regulator for approval.
Understood, of course. Your regulators are bit stickier than most. Okay. Kelvin, before I let you go, we've spoken about banking, we've spoken about financial services, digital companies in this part of the world. One question I asked all my guests before they leave is, outside of your own industry, within Southeast Asia, what are the things that you're excited about when it comes to growth in this part of the world?
I mean, the pure untapped potential of the Southeast Asian combined market, right? I mean, I think we've only barely scratched the surface of what is possible. There is a significant segment of individuals who are not yet, I guess, middle class from that perspective, and emerging middle class. So pretty much anything can be scaled: e-commerce, banking and financial services,
transport, travel. I don't know, man, but personally, I'm 100% focused on this banking-as-a-service, embedded finance, conversation, and we see this take off in multiple places - in Europe and the US and all of that. So within Southeast Asia, I don't know, I've not spent too much time looking outside, to be honest. I do try to pretend that I'm well knowledgeable in things outside
of my center of work. But yeah, I mean, I would love to see the region grow as a whole, despite the fragmentation of nation states, right. So yeah, I don't, I have no specific interests.
Great point, because I think banking underlies most economic transactions, right. And I think over the last few months, you've seen a lot of interest in Southeast Asia with the Grab IPO, the GoTo IPO, Bukalapak as well last year. So hopefully we'll see a nexus IPO maybe sometime, and hopefully in Southeast Asia as well. And hopefully, your stock price performance doesn't mirror Grab.
Well, nexus won't IPO right, because nexus is a business division within the bank. But the spin off, at the point at which we do it, we'll have a conversation around that. Yes.
Perfect. Okay. Thank you very much, Kelvin for joining us today. We will put down Kelvin's details in the description box. So if you have any questions with regards to Standard Chartered or especially nexus, banking-as-a-service platform, you can reach out to him and his team. Thanks Kelvin, and we hope to speak with you again soon.
Thanks Irza, pleasure.