GXS Bank grows SME loan portfolio after Validus acquisitions

It’s also targeting Grab merchants and Singtel customers for financing.

GXS Bank Pte. Ltd. is accelerating its push into business lending in Singapore, aiming to narrow the S$18b-S$20b funding gap faced by small and medium enterprises (SME).

“From the 15th of April to the 31st of August, we’ve been able to grow the loan book 54%,” Vishal Shah, managing director and group head of business banking at GXS, told Asian Banking & Finance via Zoom.

The digital bank, backed by Grab Holdings, Inc. and Singapore Telecommunications Ltd. (Singtel), acquired peer-to-business fintech Validus Capital Pte. Ltd. in April. Since then, GXS has rebranded the unit as GXS Capital and expanded its SME loan portfolio.

Shah said Validus kept its senior team and customers after the acquisition, whilst GXS tapped its parent firms’ ecosystems to add clients. Suppliers of both Grab and Singtel have been recruited, with further partnerships planned.

The bank has also launched pre-qualified lending for Grab merchants and Singtel customers, using transactional data to generate loan offers. For example, food and beverage operators on Grab or broadband subscribers of Singtel may be eligible for targeted financing.

GXS said these initiatives mark a key step in scaling SME lending whilst addressing a persistent funding shortfall in Singapore.
Here’s the rest of the interview.

What SME financing needs are banks failing to meet?
Singapore is fairly well-banked when it comes to consumers like you and me, but when it comes to businesses, clearly there is still a funding gap. We estimate close to S$18b to S$20b.

Why does this funding gap exist? Because many incumbent financiers are generally looking for a track record of at least three years in business. If the SME does not have that track record, they would only look at offering secured facilities. That’s a very large segment of the market, typically SMEs that are less than three years in business. Many also have a criteria of up to five years, without which they may not offer unsecured lending.

No. 2, even today, a lot of financiers—both banks and nonbanks alike—use what we call a traditional way of underwriting. Second is the requirement for collateral, hard collateral, such as cash or property.
Last is pricing. SMEs still would be attracted to pricing, which is much, much higher than what users or individuals like us would get on our personal loan.

How has the integration process been after you bought Validus Capital?
We acquired Validus Capital, which was the Singapore business of the Validus Group, and we completed that acquisition on the 15th of April. Through the acquisition, they’ve been able to, No. 1, gain access to competitive funding from GXS Bank. No. 2, we’ve been able to offer complimentary services because Validus is now rebranded to GXS Capital. The services which we’ve built at GXS Bank and what GXS Capital offers are very complementary from a financial standpoint.

From the 15th of April to the 31st of August, we’ve been able to grow the loan book 54%. The early results of the integration have been very, very encouraging.

What strengths did Validus Capital, now GXS Capital, offer that led to the decision to acquire it?
First is the capability, which we got as part of the acquisition: their tech platform. Second is data since they’ve been in the Singapore market for the last 10 years. Third, the existing partners as well as existing customers, and very importantly, the people.

How have you scaled SME lending after acquiring Validus Capital?
From the date we acquired the platform, all new loans have been disbursed through the bank’s balance sheet. What we’ve been able to do is first, with the existing customers, we had to ringfence and protect them and deepen the relationship. So a large part of the user base had facilities from other banks where they were availing themselves of a much better price. Now, we can provide the same pricing, if not better.

Second is onboarding new customers into the value chain of the existing corporate partners. So Validus Capital and now GXS Capital already works with many corporate partners, such as Seatrium Group as well as SMRT Corp. and Singapore Technologies 

Engineering Ltd. We were able to attract new suppliers, large conglomerates.Third, GXS Capital is also an approved financier of the vendors on the government platform of Infocomm Media Development Authority. As one of the approved financiers for receivable finance, we are now able to attract new users who are supplying to the government (Land Transport Authority, Public Utility Board and Housing Development Board). So any supplier who is providing services or goods to any of these government agencies need to be registered on the platform, and GXS Capital is an approved financier on the platform.

Through that, we were able to get new users as well, and we added new corporate partners. Through them, we were able to grow and scale the business.