HONG KONG — Hong Kong financial technology company WeLab has teamed with the digital investment unit of Germany’s Allianz Group, with an eye toward expanding services in Southeast Asia.
The Hong Kong unicorn on Monday announced that it had completed the initial close of its latest round of funding, led by new investor Allianz X with $75 million. Existing investors in the fintech startup also participated in the round, but WeLab declined to name them. The final close of the funding round is expected in the coming months.
WeLab also said it is entering into a “strategic cooperation” with another unit of the German financial services company that will offer digital wealth management and financial services in southern China’s Greater Bay Area.
Simon Loong, founder and CEO of WeLab, said in an interview with Nikkei Asia that as part of its strategic partnership with Allianz X, WeLab aims to expand its business in Southeast Asia this year — either by deepening its presence in Indonesia or entering new markets like Vietnam, Thailand and the Philippines.
“These markets have high potential as they have a sizable unbanked population,” he said. “They have 400 million internet users, but 70% of them are unbanked or underbanked.”
Following the start of its partnership with Allianz, WeLab this year plans to add roughly 100 employees from the current 900.
Loong said that its possible expansion in the region includes rolling out new virtual bank businesses or offering WeLab’s digitization technology to companies. In its Southeast Asia expansion, the company will focus on the wealth advisory sector and a “buy now, pay later” service for individuals.
The latest financing round boosts WeLab’s total funding to more than $600 million since it was founded in 2013, but the company declined to disclose its valuation. Before the latest investment, CB Insights valued the company at more than $1 billion, making the Hong Kong company a unicorn.
Its backers include China Construction Bank International, International Finance Corp., Malaysian sovereign wealth fund Khazanah Nasional, CK Hutchison’s TOM Group and Sequoia Capital.
WeLab operates online financial services, including digital banking and consumer finance in mainland China, Hong Kong and Indonesia for nearly 50 million customers. It also serves more than 600 businesses.
Last July, the company launched WeLab Bank — the only stand-alone homegrown virtual bank in Hong Kong, offering time deposits and numberless debit-card services to local residents.
Loong declined to disclose WeLab Bank’s total number of customers and the amount of its deposits, but he said the digital bank gained 150% more accounts in the fourth quarter of 2020 versus the previous quarter. It hopes to break even in three to five years.
Hong Kong is leading the Asia-Pacific region’s charge into virtual banking. The Hong Kong Monetary Authority licensed eight virtual banks in 2019, all of which launched last year.
In Southeast Asia, Singapore awarded four digital bank licenses this past December, while Malaysia received more than 40 applications for five licenses that will be issued next year. Other countries, including Thailand, also are looking into issuing licenses.
Loong said that apart from traditional banks, an increasing number of conglomerates, big companies and regulators in Southeast Asia have approached WeLab for partnership opportunities or to ask about its experience in virtual banking.
He said Hong Kong is a “fantastic test bed” for WeLab’s digital banking business, as the city has a relatively small population and a trusted market regulator. “With that experience, it is more credible to go to other markets,” he said.
WeLab also said on Monday that it is targeting wealth management opportunities in the Greater Bay Area, which includes Hong Kong, Macao and several cities in neighboring Guangdong Province, a region of more than 70 million people.
Partnered with Allianz Global Investors, WeLab said it aims to roll out a wealth management service for its mobile application in Hong Kong this year. The service will offer suggestions on building portfolios and automatic investment plans, as well as regularly reviewing customers’ investment goals.
Loong hopes the service will reach customers in the rest of the Greater Bay Area by next year through Wealth Management Connect — a cross-border pilot program — after policy details are confirmed.
Hong Kong’s virtual banks offered attractive interest rates on savings accounts in their first year in an effort to add customers, but they now are cutting those rates following the cash-burning promotion period.
Banks are moving on to the next stage to see how they can retain customers, create products with higher profit margins and expand markets.
Fintech companies in the Asia-Pacific attracted $11.6 billion from venture capital, private equity and mergers and acquisitions last year, down from $16.8 billion in 2019, KPMG said in a report last month, as the coronavirus pandemic led to an investment decline in emerging markets such as Southeast Asia.
KMPG also noted that as Hong Kong’s technology initial public offering market was robust in 2020, unicorn fintechs increasingly are considering going public.
Asked whether WeLab will consider an IPO in Hong Kong, Loong said: “It is always something on my mind.”