While digital banks in North America and Europe are often plucky startups, regulators in East Asia tend to be less permissive of experimentation in the banking sector. Most digital banks in the region are thus spun out of prominent, established financial services firms, tech companies or in the case of Southeast Asia, conglomerates.
A look at the list of possible applicants for virtual banking licenses in Thailand that appeared in a Bloomberg report last week turns up some familiar names: Siam Commercial Bank (SCBX), Charoen Pokphand Group and Gulf Energy Development Pcl. SCB is the largest commercial bank in Thailand by market value, while CP Group is one of its largest conglomerates and Gulf Energy the kingdom’s biggest private energy company. The Chearavanont family, which controls CP Group, has a net worth of US$31 billion.
SCBX and Kakao Bank will jointly apply for the digibanking license together as consortium partners while Hong Kong-based online lender WeBank will serve as a tech partner for the consortium, providing tech architecture and solutions. Having backed away from an earlier embrace of cryptocurrency, SCBX 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.
WeBank, meanwhile, is one of Hong Kong’s more ambitious digital banks. In Nov. 2023, it expanded to Indonesia through a partnership with Indonesian conglomerate Astra, launching Bank Saqu. Though WeBank lost about US$20.7 million in the first half of 2023, it expects to reach profitability this year or next.
CP Group, meanwhile, will apply for a digibanking license through its Ant International-backed e-wallet TrueMoney. TrueMoney is the paramount node in the ecosystem of Ascend Money, which became Thailand’s first fintech unicorn in September 2021, achieving a US$1.5 billion following a US$150 million funding round. In May 2023, TrueMoney co-president Monsinee Nakapanant said the company sought for 50% of the Thai population to use its services “actively” on a daily basis by 2025. With a digital banking license, that goal would be more achievable.
Finally, Gulf Energy Development will team up with telecoms giant Advanced Info Service Plc (AIS) and Krungthai Bank Plc (KTB) to apply for a virtual bank license, Gulf’s CEO Sarath Ratanavadi said last week. “Clients looking to borrow from 10,000 baht ($275) to 100,000 baht ($2750) will find it easier to do so [via virtual banks],” Sarath was quoted as saying by Thailand’s The Nation newspaper.
The overall impact of the digital banks on Thailand’s financial services sector is likely to be moderate. The applicants all say they want to boost financial inclusion, but to really do so they will need to cater to a customer demographic with a higher level of default risk than the typical borrower at a traditional commercial bank in Thailand.