Razer seeks license to open digital bank for youth in Singapore

February 25, 2020 14:55
Limeng Lee, CEO of Razer's fintech arm, said the company has submitted an application for digital full bank license in Singapore, which will focus on millennials. Photo: Razer Fintech

Razer Inc. (01337.HK), which makes keyboards and computer mice for video game fans, has submitted an application for a digital full bank license in Singapore, doubling down on its expansion into financial technology.

The digital bank, called Razer Youth Bank, will focus on young customers, particularly millennials, who are already familiar with company through its gaming products, Limeng Lee, chief executive of the company’s financial technology unit Razer Fintech, told EJ Insight in an exclusive interview.

Singapore’s central bank, Monetary Authority of Singapore, will issue up to five new digital bank licenses, with the names of the successful applicants to be announced in mid-2020.

Two of the digital full bank licenses would allow non-banking entities to take deposits from retail customers, while the remaining three would be wholesale bank licenses for companies to serve small and medium-sized businesses.

Lee said there are huge gaps between what traditional banks offer and what young adults need.

“There are different researches showing that there is deep distrust in traditional banks by the youth and that trust in banking services is shifting towards tech on a global level,” Lee said.

“The youths feel that current financial products or services are not tailored for them and that new financial products or services lack innovation to address experiential youth lifestyle.”

Razer boasts a deep understanding of the youth clientele, which is the reason for its narrower focus on the sector.

Over 70 percent of the millennials are gamers, and Razer is a defining brand for the global youth population, Lee said, noting that more than 80 percent of its 80 million registered users are under the age of 35.

"Youths and teenagers who like to play video games would have known the Razer brand since childhood. And they will also be happy to use the products and services from our digital bank. As they grow up, we can offer products and services fit for all stages in their lives," he said.

Lee said Razer enjoys a global presence and strong brand recognition among the youth. And together with its innovative digital payment solutions, the company is in a unique position to create a digital-first banking platform to address the needs of a large yet underserved segment of the population.

Underserved market

The firm’s ambition is to promote digital payments and increase financial inclusivity for the youth across emerging markets.

It wants to start with Southeast Asia, which has a large unbanked and underserved population of over 438 million and a millennial population of over 213 million, Lee said.

Razer aims to customize its digital bank products and services based on its deep understanding of the youth's lifestyle needs.

The digital bank will tap on Razer’s track record of innovation and fintech businesses, coupled with the youth's gaming and lifestyle datasets, to deliver unique user experiences.

The firm will also collaborate with industry leaders and lifestyle partners, to create and deliver innovative and bespoke banking solutions to its users.

"For example, an avid gamer of World of Warcraft would likely be a fan of Game of Thrones, according to the data analysis. Therefore, we may offer those customers new products or services in the relevant entertainment field,” Lee said.

Razer, which holds a 60 percent stake in Razer Youth Bank, applied for the digital full bank license together with a consortium of partners including Singapore’s supermarket business giant Sheng Siong Holdings, FWD, the insurance arm of Hong Kong tycoon Richard Li Tzar-kai's Pacific Century Group, and venture capital firm Insignia Ventures Partners, among others.

Millennial community

Targeting young adults, the majority of whom don't have a bank account or a credit history, Razer will tap transaction data it has gathered from its user base worldwide, while building the digital bank on its existing fintech and payments ecosystem.

“Over the years, we have created natural extensions to be a part of global youth and millennial community,” said Lee. “This has presented numerous opportunities for us to invest into multiple new verticals of growth. Fintech is one such area.”

Razer’s moves in fintech started in August 2017, when Razer’s CEO Min-Liang Tan tweeted to Singapore’s Prime Minister Lee Hsien Loong that it would build a unified digital payments solution for the country.

In the same year, the firm launched the virtual credit platform Razer Gold, which enables users to use virtual credits to buy games and in-game content in different games while garnering loyalty rewards.

After three years of development, Razer Fintech became one of the largest O2O (online-to-offline) digital payment networks in Southeast Asia, said Lee.

The fintech arm operates two verticals: Razer Merchant Services (RMS), a business-to-business payments solution, and Razer Pay, the business-to-consumer solution comprising an e-wallet.

Razer Fintech’s RMS includes a card processing gateway supporting global scheme cards and over 110 payment methods, and an offline payment network with over 1 million physical acceptance points, including numerous mom-and-pop shops, across Southeast Asia.

Payment gateway

Razer Gold’s users, even those without credit cards or bank accounts, can exchange cash for gaming credits in Razer’s offline payment network.

“Razer Fintech’s business started from the B2B side of things, building up our payment gateway capabilities and offline merchant points across Southeast Asia which took time to educate merchant partners for acceptance and integration as we were one of the first movers in the market,” explained Lee.

“However, once we have built up this network, we have been able to leverage this competitive advantage and the Razer brand to launch our B2C solution, Razer Pay e-wallet, first in Malaysia to resounding success.”

Razer Pay enables users to make mobile top-ups, buy virtual credits, and purchase music and streaming services.

From its pilot market in Malaysia in 2018, it gained approximately 1 million registered user accounts as of June 30, 2019.

Razer Fintech saw a robust performance in the first half of 2019, according to Razer’s financial results, generating over US$828 million in total payment value (TPV), compared with US$1.4 billion in value it recorded for the entire 2018.

Lee believes the creation of Razer Youth Bank is a natural extension of Razer’s payments business. “We have already seen strong traction in Malaysia and Singapore, and we will continue to roll out in other Southeast Asia markets first before launching our Fintech globally.”

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Razer is known for its gaming hardware, software platforms, and virtual credit services for gamers. Photo: Razer Fintech

EJ Insight writer