(Bloomberg) -- The large number of Singaporeans still without good access to financial services will be key to creating a successful digital bank in the country, according to executives from Grab Holdings Inc. and Singapore Telecommunications Ltd.

“We do feel very strongly that we can make a bit of a difference in Singapore. There are real needs that need to be met,” said Arthur Lang, chief executive officer of Singtel’s International Group.

On Monday, Grab and Singtel said they are teaming up to apply for a full digital banking license before the year-end deadline, jumping aboard a Singapore government initiative to attract technology firms into its financial sector to stimulate innovation and competition. The move brings together one of Southeast Asia’s largest operators of online businesses from food delivery to car-hailing with Singapore’s largest telecommunications firm.

Grab, Singtel Team Up on Singapore Digital Bank License Bid

While Singapore has strong, well-established banks, and is better served than other Southeast Asian countries, there’s still a significant minority of small- and mid-sized companies and individuals seeking cheaper and improved services, executives from the two companies said in a joint interview.

They pointed to a recent study which showed 38% of Singaporeans are under-banked while another 2% have no access to financial services.

There’s also a “huge” funding gap for small- and medium-enterprises in Singapore, according to Reuben Lai, senior managing director of Grab Financial Group, the subsidiary which would take a majority 60% stake if the venture is granted a license. Singtel would hold the remaining 40%.

The service provided by existing banks to smaller firms tends to involve layers of hidden fees and poor support for managing and growing the business, according to a joint presentation by Grab and Singtel on their license bid.

Still, Grab and Singtel will be up against local and international financial institutions such as DBS Group Holdings Ltd. and Citigroup Inc. that dominate the lending landscape. “We are fully aware that banks are very well run,” said Lang.

The two companies declined to provide profit forecasts, but expressed confidence that the venture would be successful financially. The Monetary Authority of Singapore “wants to see a business that’s sustainable. That’s core for our mission,” said Lai.

“At the end of the day when we go back to our shareholders to make the case it has to be driven by numbers and returns,” said Singtel’s Lang.

Another headwind for the ventures is the relatively large amount of capital required by the MAS compared with some other jurisdictions welcoming tech firms into their banking sectors. Singapore’s full banking licenses require capital of S$1.5 billion ($1.1 billion), while Hong Kong has set HK$300 million ($38.5 million) as the minimum capital for its new breed of digital banks.