GXS Bank Pte Ltd, a digital bank backed by Grab Holdings Ltd and Singapore Telecommunications Ltd (Singtel), plans to swing to a profit by March 2027 in part by doubling its loan book every six months.

The two-year-old Singapore lender targets financially underserved sectors such as gig economy workers and small companies, segments that often transact over the Grab app in the city-state, creating a data trove that can shed light on creditworthiness.

“We’re not competing for the same customer that the big bank is trying to get,” GXS group chief executive officer Muthukrishnan Ramaswami, 67, said in an interview. “There are so many people who are underserved that there is enough money to be made by serving them.”

GXS and its rivals in the city-state’s digital banking sector face the uphill task of competing with Singapore’s heavyweight, brick-and-mortar trio of DBS Group Holdings Ltd, Oversea-Chinese Banking Corp and United Overseas Bank Ltd. The latter group commanded 65% of deposits and 84% of lending on the island in the first quarter, calculations by Bloomberg Intelligence show.

Losses at GXS widened to S$152.1 million in 2023 amid a ramp-up of operations from S$113.7 million in the prior year, its annual report shows. The bank, which offers inducements such as bonus interest to woo funds, limits deposits to a maximum of S$75,000 per customer as part of licensing arrangements and risk tolerance assessments.

Ramaswami outlined goals including S$3 billion in deposits and a S$2 billion loan book over the next three years. The lender’s average Singapore loan size is about S$6,000. Higher volumes and cost-effective digital channels will bolster profits, he said.

Grab owns 60% of GXS and Singtel the remainder. Together they have committed S$1.5 billion of capital through March 2027. About half has already come in, Ramaswami said, adding there are no plans for a listing during the period.

In a statement Tuesday, GXS Bank said chief executive officer Charles Wong stepped down and that his role is being subsumed by Ramaswami’s position as group CEO.

Scaling up the business is going to be a big test, analysts said. Zennon Kapron, managing director of consultancy Kapronasia, argued GXS “needs to go outside of its own established ecosystem to get enough volume”.

Sarah Jane Mahmud, senior analyst for South and Southeast Asian banks and regulation at Bloomberg Intelligence, flagged the risk of limited earnings prospects for digital banks in Singapore. They may “need to look at regional expansion”, she said.

Singapore is expected to drive revenues for the next three to four years, while Indonesia’s larger population offers a scaling opportunity longer term, Ramaswami said.

Digital banks across Southeast Asia are trying to deliver services to the unbanked or underbanked through mobile apps, with varied success so far.

  - Bloomberg