There are good “a-ha” moments and there are bad ones, according to Simon Loong. Developing a virtual bank at the height of the pandemic was a good “a-ha,” even though it entailed an uphill learning process for his Hong Kong fintech company WeLab, an online lender nearly a decade old.
“We see digital banking as the future of financial services,” says Loong, co-founder, and CEO of WeLab, in an interview on the sidelines of the Forbes Global CEO conference held in Singapore. WeLab launched its eponymous banking app in Hong Kong during the summer of 2020. With services spanning time deposits and digital wealth advisory, the bank has weathered Covid-19 uncertainty to accumulate a total of 500,000 users in Hong Kong, including users for the group’s lending platform Welland.
Founded in 2013, WeLab has garnered a total of $900 million in funding from the likes of German bank Allianz, China Construction Bank, International Finance Corporation, Sequoia Capital, and Hong Kong billionaire Li Ka-Shing’s TOM Group. WeLab became a unicorn – a startup with a valuation of more than $1 billion – after a $220 million funding round in 2017; the company declined to disclose its current valuation.
Now, the nine-year-old fintech company plans to bring its digital bank product overseas, starting with Indonesia. “As entrepreneurs, we always look at, ‘how do you build it once, and sell it 200 times?’ For me, it is about monetizing the upfront investment on WeLab Bank,” continues Loong, 45, proudly sporting an orange and blue lapel pin of his company’s logo. Whether in Hong Kong or Indonesia’s capital city of Jakarta, he adds the “fundamental thesis” behind his platform’s digital banking product remains the same-priming it for export.
WeLab is the latest foreign company to enter Indonesia, where banking as a whole remains nascent. British bank Standard Chartered, collaborating with Indonesian e-commerce company Bukalapak, launched digital bank BukaTabungan last month. Line Bank, the banking service of Japan-based chat app Line – backed by Korean internet giant Naver and Japanese tech giant SoftBank – launched a digital banking app in Indonesia in June last year.
As a first step, WeLab acquired Indonesia Bank Jasa Jakarta (BJJ) alongside Hong Kong-based business group Jardine Matheson’s Astra International in early September. The move marks the Hong Kong fintech’s second joint venture with Astra after WeLab acquired a controlling stake in BJJ for $240 million last December and the two formed a joint venture company Astra WeLab Digital Arta (AWDA) in 2018. WeLab also launched Maucash, a digital lending product, in Indonesia that year.
“Investment in BJJ is in line with Astra [sic] aspirations in financial services pillars to become leading retail financial providers in Indonesia and support the growth of the financial services industry as well as the economy of Indonesia,” said Djony Bunarto Tjondro, President Director of Astra, in a statement about the acquisition.
Nurturing a financial services industry is a massive undertaking for the largest country in Southeast Asia, which lags behind in the adoption of financial services. Among Indonesia’s population of 270 million, at least 77% were either unbanked or underbanked as of 2018, according to a widely cited article from the World Economic Forum this January. Indonesia’s government aims to achieve 90% financial inclusion by 2024.
“In a [fully-banked] market like Hong Kong, pretty similar to Singapore, you need to focus on a few high-margin products for a digital bank to be profitable. For us, it’s lending and wealth…there’s no point selling someone that third bank account,” says Loong. “In Indonesia, our strategy would be financial inclusion. We’re actually able to offer accounts to people that have never had an account.”
The CEO cites the country’s youth as a factor in Indonesia’s openness to digital banking. Two-thirds of the country’s population are adults below the age of 41, according to government statistics this year. Younger demographics have driven a surge in demand for digital wallets, such as SeaMonkey, the e-wallet under billionaire Forrest Li’s Sea group, and GoPay, the payments platform of Indonesia’s GoTo. To Loong, these wallets are only “simple, low-ticket-sized” tools that are a stopgap for bank accounts.
“A digital wallet, as a product, doesn’t pay interest, cannot lend money – it’s not a bank, right?” says Loong. “The younger generation will shift from cash, in the past, to a digital wallet, to digital banking, where they can fulfill their more holistic and comprehensive needs.”
Still, WeLab faces steep competition from established local players. Spurred by relaxed regulatory measures, local startups have launched digital banks in Indonesia over the past two years. GoTo-backed Bank Jago released its all-digital banking app last April, after becoming Indonesia’s first all-digital bank last February. SoftBank-backed Aladin launched an app for Sharia digital banking or banking that is compliant with Islamic law, last March.
Loong remains confident that WeLab can keep up, with plans to launch a digital bank app next year – the same timeframe as Southeast Asian super app Grab, which will release its digital bank in Malaysia and Indonesia. “Banking, as a whole, is not a winner-takes-all kind of industry…it can allow multiple large players to exist,” he says. “We’re quite happy with the market, and we feel that we are competitive because WeLab Bank in Hong Kong has already built a lot of products.”
WeLab’s proven experience running a digital bank in Hong Kong, along with its suite of online lending offerings, would give it an edge over its competitors, Loong says. The market “underestimates the complexity of building a digital bank,” given the high expectations from regulators and customers. “You’re not just lending money or doing stock brokerage, or doing wealth advisory. You’re a bank, people give you their life savings,” he explains.
Southeast Asia is a new territory for Loong, whose career has been split between Hong Kong and mainland China. Prior to co-founding WeLab, Loong spent 15 years in the retail banking divisions of Citibank and Standard Chartered. While pursuing a master’s degree in management at the Stanford Graduate School of Business, he met his wife, Frances Kang. Together, the couple would go on to cofound WeLab alongside Kelly Wong, Loong’s classmate from his time pursuing a bachelor’s in commerce at the University of Sydney in Australia.
The fintech giant’s core business is in Hong Kong and mainland China, where it operates online consumer lending platforms WeLend and WeLab Digital. Last April, WeLab was in talks to go public later that year at a valuation of up to $2 billion, but the IPO fell through. The company declined to comment on its listing plans, but told Forbes it remains fully committed to building and expanding its digital banks in Hong Kong and Indonesia while “reviewing strategic opportunities.”
Indonesia serves as a springboard in Loong’s grand strategy, extending the company’s reach to other territories in the region. WeLab plans to enter Thailand, the Philippines, and Vietnam but did not disclose a timeline for the move. In the meantime, Loong says the company will continue its business in both Hong Kong and mainland China while extracting lessons that can be applied to Indonesia and future markets.
“The technology, the know-how…I know we will learn a lot, and make a lot of mistakes,” Loong says. “Doing Indonesia is about creating an opportunity for us to make use of, ‘how to be smarter the next time.’ So, let’s not make the same damn mistakes again.”