Assessing the Kakao Bank-SCBX tie-up

Written by Kapronasia || July 10 2023

While it may not be a sure thing, the Kakao Bank-SCBX tie-up looks promising. Following the Bank of Thailand’s (BOT) announcement earlier this year that it would allow digital banks by 2025 – no rush, it seems – some of the biggest financial groups in the kingdom have expressed their interest in setting up a digital lender. It just so happens that Thailand’s decision to greenlight digibanks comes as South Korea’s Kakao Bank is preparing for international expansion.

Siam Commercial Bank (SCB) is determined to capitalize on digital finance opportunities, to the extent it even rebranded for all intents and purposes as SCBX Group, with SCBX as a private equity investment arm that focuses on fintech. While it has been successful in many regards, SCBX got caught up in the crypto bull market and ultimately had to disentangle itself from the acquisition of the Thai crypto exchange Bitkub after deeming the investment too risky.

Now SCBX is looking for a less risky fintech opportunity than digital assets. With all the resources of a major Thai incumbent bank, digital banking could be a good opportunity. While more than 80% of Thais have a bank account, limiting the low-hanging fruit, Kakao Bank has experience building an online bank in a market that is even better banked than Thailand, and making it profitable quickly. Kakao Bank has designed a large suite of products that with some tweaking could be applicable to the Thai market.

In mid-June, SCBX and Kakao Bank announced that they would apply for a virtual banking license in Thailand. Under their agreement, SCBX will hold a majority stake in the venture while Kakao will have at least a 20% share. Between the two of them, meeting capitalization requirements will be a breeze, while the majority Thai ownership should sit well with the BOT. More partners may join the consortium in the future.

One question we have is how, if at all, can Kakao Bank leverage its Kakao Talk messaging app in Thailand? That app has been a key part of its secret sauce back home – the foundation of its super app. However, Kakao Talk does not have a lot of Thai users, who prefer to chat with Naver’s Line.

It may be that Kakao has to rely on SCBX’s understanding of the local market and focus more on designing competitive digital financial products than building a broader digital services ecosystem.

That seems to be the message in a statement the two companies released after announcing their partnership. “We hope to replicate the disruption Kakao Bank brought to the South Korean retail banking market in Thailand with our leadership in financial technology coupled with SCBX’s thorough understanding of the market,” said Kakao Bank CEO Yun Ho Young. “We believe our efforts will extend the benefits of full mobile banking services to our customers in Thailand and beyond.”