Virtual banks to revolutionise Thailand’s financial landscape

[webfact]

The Royal Gazette announced that virtual banks are set to become a reality in Thailand, with the Bank of Thailand (BoT) accepting applications from March 20 to September 19 this year. The aim is to stimulate competition and ensure the stability of the financial system, without limiting the number of licences available.

 

Virtual banks are expected to cater to customers who have been underserved by traditional banking services, including SMEs struggling to secure capital and low-income individuals. This is hoped to reduce reliance on informal borrowing channels, as traditional banks often reject applications for unsecured loans.

 

The BoT hopes that the creation of virtual banks will lead to lower interest rates and fees, as operating costs for purely digital services are lower due to fewer staff and no physical branches. This should also foster competition, resulting in virtual banks offering more reasonable interest and fee rates.

 

However, there is ongoing debate about whether these banks can provide easy capital access for low-income earners and SMEs while ensuring consumer safety. The BoT anticipates announcing the approval of virtual bank licences in June 2025, with operations expected to commence in June 2026.

Wipawin Promboon, senior director of the financial institutions’ strategy department at the BoT, stated that the formation of virtual banks should lead to lower interest rates and fees as they lack physical branches and employ fewer staff. He noted that purely digital banking services in other countries have significantly improved financial inclusion for underserved and unserved populations.

 

A major concern for the Federation of Thai SMEs is easier access to financial resources once virtual banks are established. Sangchai Theerakulwanich, president of the federation, argued that virtual banks could alleviate the liquidity problems faced by SMEs. He suggests that the introduction of virtual banks should enhance competition, assisting SMEs, freelancers, and low-income earners in need of funds, as these banks should be able to offer lower interest rates and fees.

 

Improved services

 

Sanan Angubolkul, chairman of the Thai Chamber of Commerce, expects virtual banks to better cater to the needs of customers and provide improved access to financial services for unserved segments of the population and SMEs. He also stated that virtual banks still face challenges in terms of deposit mobilisation and loan analysis.

 

Moreover, he noted that many traditional banks are offering more digital financial services, such as mobile and Internet banking. He also asserted that while virtual banks are unlikely to significantly impact existing banks’ financial performance, they should intensify competition by offering new services.

 

Thanyalak Vacharachaisurapol, deputy manager at Kasikorn Research Center (K-Research), expects the impact of new virtual banks on traditional banks to be relatively modest and unlikely to significantly disrupt their operations during the initial three years of operation. She emphasised that having the right business model that covers customer segments, financial products and services, interest rates and fees, business operations and cost control, will be key to the success of virtual banks in Thailand.

 

However, virtual banks also face a unique set of risks due to their heavy reliance on technology and third-party service providers. Khongsak Kortrakul, security engineer director for Southeast Asia & Korea at Check Point Software Technologies, highlighted that virtual banks are prime targets for cybercriminals seeking to exploit vulnerabilities.

 

Anothai Wettayakorn, managing director of IBM Thailand, stated that as banks look to experiment with emerging technologies such as generative artificial intelligence (AI), hackers are expected to leverage AI technology at the same speed, scale and sophistication. Therefore, financial organisations and virtual banks must enable responsible, explainable, high-quality and trustworthy AI models, while adhering to regulatory compliance, reported Bangkok Post.

 

by Alex Morgan 

Picture courtesy of Bangkok Post

 

Source: The Thaiger 2024-03-18

 

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[Stocky]

11 minutes ago, webfact said:

However, there is ongoing debate about whether these banks can provide easy capital access for low-income earners and SMEs while ensuring consumer safety.

Yep.

[NoDisplayName]

1 hour ago, webfact said:

Virtual banks are expected to cater to customers who have been underserved by traditional banking services

 

That would be.......everyone.

[Everyman]

I think we can be sure that non Thai citizens won’t be able to use these new banks at all. That may be cynical it’s probably right. 

[sherwood]

23 minutes ago, Everyman said:

I think we can be sure that non Thai citizens won’t be able to use these new banks at all. That may be cynical it’s probably right. 

I for one would not even be interested in using one.

That's why we have loan sharks.

Then again, how much for a license application...

Edited March 18 by sherwood

[soalbundy]

17 hours ago, NoDisplayName said:

 

That would be.......everyone.

Ahhh, the modern world of technology. I needed a new bank card from my German bank, they sent me one but omitted to tell me that this new card needed a new Tan generator for QR codes, the German producer doesn't post them outside of Europe so I arranged for a German friend to buy one and send it to me. Several months ago the 'sofort pay by Klarna' app from Wise was no longer available (used by those with a German bank) my Maestro card couldn't be used by any of the other methods of transferring money so again I asked my bank to send me a Mastercard (it's still on its way). Meanwhile my bank sent me a registration for a push-Tan method of reach my bank with my iphone. I downloaded the app and tried reaching my account but it was recognized that my phone lock wasn't activated (hasn't been for years) and to proceed further I had to activate it, I did so. I could no longer remember the the code, after 3 attempts the phone shut down dead. Turning to my computer I clicked on to Google which sent me a message saying they had sent me a code via SMS to ascertain it was really me but of course since the phone was dead I couldn't read it. So now I had no phone, no usable bankcard, couldn't open Google and couldn't transfer funds...I called over my step daughter (22 now) who squatted on her haunches Thai style, my phone in one hand and her phone in the other and proceeded to press buttons at a furious pace looking from one phone to the other. After 30 minutes she called out in triumph, "All done papa! Don't lock the phone again". The configuration is now different but it works.

[hotchilli]

Computer says no.

[lkn]

18 hours ago, NoDisplayName said:

That would be.......everyone.

Most people in Thailand have a handful of accounts with different banks, so it’s not like banks are refusing new customers.

 

They are refusing to give cheap credit, but that’s often for the customer’s own good, unfortunately though the Thais then turn to loan sharks or other dodgy finance options. Is that what you mean by everyone being underserved?

 

I would say it’s really the government underserving the population by not being serious about cracking down on loan sharks and dodgy finance options. This problem will not be solved by virtual banks.

[Purdey]

Can't imagine them accessing the poor.

"How do I get money?"

"Open your laptop."

"Don't have one."

"Contact us after you buy one."

" Can I borrow the money to buy a laptop?"

[NoDisplayName]

1 hour ago, lkn said:

Most people in Thailand have a handful of accounts with different banks, so it’s not like banks are refusing new customers.

 

They are refusing to give cheap credit, but that’s often for the customer’s own good, unfortunately though the Thais then turn to loan sharks or other dodgy finance options. Is that what you mean by everyone being underserved?

 

I would say it’s really the government underserving the population by not being serious about cracking down on loan sharks and dodgy finance options. This problem will not be solved by virtual banks.

 

Underserved, as in not serving the customers.  Poorest service of any banks, ever.  Draw a number, sit and wait for 4 hours, only to be told take an hour for lunch, come back get new number.

 

Thailand is the land of pie in the sky high tech quantum mechanical systemic word salad.  Instead of fixing the things that are broke, replace them with something non-existent at 3x the price, because someone's third cousin's brother's sister-in-law's son saw a cool thing on the latest episode of Transformers, then return to the original 1950's method when the future is found to not be the future, at only 2x the price.  Plus commissions.

 

I'm not expecting anything to come of this latest "hub of Asian banking" gimmick, but do call me when they can manage to operate a sidewalk successfully.

[BE88]

Scams on the thai population will improve.

[mrfill]

And next week we will have the announcement of the Virtual Brown Envelope....