SINGAPORE: United Overseas Bank (UOB) is investing US$10 million (S$13.93 million) in a partnership with global equity crowdfunding platform, OurCrowd.
The move is UOB's latest initiative in the start-up space, which comes as Singapore banks step up efforts to work more closely with technology firms.
Through the collaboration, startups and small businesses in Asia can seek small investments from a large number of global investors in return for equity or shares in their company. The partnership aims to address the US$180 billion SME funding gap in Southeast Asia.
UOB's Head of Group Channels and Digitalisation, Janet Young, said: "It can be challenging for small businesses to obtain financing, particularly equity financing, in the early stages of growth. UOB has partnered with OurCrowd to connect smart ideas with smart money."
The local bank added that the collaboration will also open up alternative investment opportunities to its accredited investors.
"The investor in Asia can now access quality deal flow in Israel, Silicon Valley and beyond,” said OurCrowd Founder and CEO Jonathan Medved.
While the asset class is inherently risky and illiquid, OurCrowd said it carries out due diligence on the firms, approving just one in 50 applications to raise funds on its platform.
"You can't just let companies come willy nilly to a platform and let the infinite wisdom of the crowd decide," said Mr Medved. "What OurCrowd does is, we check each and everyone of these investment opportunities out very seriously. We do, what's called, due diligence.
"We actually investigate the opportunity, the team, the market, the technology, the competition. And when we make a decision to invest, we deploy our own capital so we're investing alongside the investors from the crowd."
OurCrowd has also invested more than US$200 million in its 93 portfolio companies- mainly spread across the United States, Europe and Middle east - since its launch in 2013.
EQUITY CROWDFUNDING IN ASIA
Observers have said equity crowdfunding is still relatively new in Asia. However, UOB said there is growing interest among its private banking clients seeking alternative investment opportunities. The Singapore lender will also benefit when these start-ups get bigger, as it can then offer them loans and other services.
"When they grow further, this is a good validation of them being able to raise equity," said Ms Young. "The bank then can continue to do our key traditional banking with them - foreign exchange, trade finance, working capital - and then as they expand to different markets, provide them with the connection of our franchise in the different markets, and suppliers, and procurement.
"That's all what we can do in traditional banking. So we hope that with this, more of our SMEs (small- and medium-enterprises) will be able to scale to become big to become successful and connect the smart money with smart ideas."
UOB's other initiatives in the start-up space include participating in a financial services technology fintech accelerator programme with Infocomm Investments (IIPL), a unit of the Infocomm Development Authority of Singapore (IDA).
OTHER BANKS ALSO TAPPING INTO TECH MARKET
UOB is not alone in raising its bets on technology. OCBC recently launched the Open Vault to support innovations that can be used in its banking operations.
"A lot of the fintechs we're seeing are focusing on areas like big data, focusing on security, authentication," said Mr Pranav Seth, head of e-business and business transformation at OCBC Bank. "Then there are other companies that are experimenting with technologies like blockchain. So there's a lot of stuff happening.
"From a customer value proposition perspective, there's value to be obtained in the backend operations. So if you can simplify some of the banking operations like AML (Anti-Money Laundering), KYC (Know Your Client), there are a lot of ideas out there using blockchain to simplify these, for example.
"Even on the customer facing side, we believe there's a huge opportunity as OCBC hopes to make wealth management available to large section of societies and communities. Anything a fintech can do to make that happen - either help our analysts be on top of news more easily, get advisory to help us do more faster, contextual manner - there are opportunities.
"On the lending side, whether it's SME lending or personal lending, there are innovative ways we can use big data to make better credit decisions, and extend credit to a larger set of the society."
As for DBS, the bank started on Thursday the second run of its HotSpot programme for very early stage start-ups to develop business ideas and seek funding. The start-ups supported by DBS will include firms in financial technology, social enterprise and digital technology, as well as innovators within the bank.