Thailand’s virtual bank race heats up

[BANGKOK] Thailand’s finance ministry is set to issue three virtual banking licenses by mid-June – a move that could jolt the country’s lucrative but tightly held financial sector, long dominated by a few powerful incumbents. The digital permits aim to inject long-awaited competition into the banking landscape.

“The good thing is that, finally, the government is granting new bank licenses, because they haven’t granted new licenses for many decades,” said Chonladet Khemarattana, president of the Thai Fintech Association.

Five consortiums have submitted bids, but only three will succeed.

The contenders include a “who’s who” of Thailand’s corporate heavyweights, including three commercial banks, agroindustry-telecom-retail giant Charoen Pokphand (CP), energy-telecom conglomerate Gulf Energy, and national petroleum company PTT.

While the new banks must be majority Thai-owned, at least three foreign virtual lenders – South Korea’s Kakao, China’s WeBank, and Hong Kong’s WeLab – are partnering with the bidders.

“The objective of the virtual banks is to serve the underserved, and in Thailand the undeserved segments are personal loans and SME loans,” he said.

The new virtual banks – required to go live within a year of receiving their licenses – will be entering the Thai market at a challenging moment.

Economic growth is losing steam, dragged down by weak consumer spending as traditional banks tighten lending for personal loans and SMEs to avoid a rise in non-performing loans.

With up to 60 per cent lower costs than traditional banks – thanks to leaner operations, no physical branches, smaller payrolls and fewer legacy systems – virtual banks are expected to operate on narrower margins and take on greater risk in reaching underbanked customers.

In tandem with the licensing process, the Bank of Thailand (BOT) is working on legislation to be passed later this year that will introduce “open data” to the financial system.

The new rules will allow customers to request that banks and securities firms share their personal financial data with other institutions, potentially expanding their credit access.

“Our priority is to put in place data sharing infrastructure, recognising its pivotal role in driving further innovations and efficiency within the financial system,” said Roong Poshyananda Mallikamas, the Thai central bank’s deputy governor.

“Open data is a catalyst for financial inclusion. It will enable customers to better use their data to receive improved financial services,” she told a recent seminar.

While the new rules will benefit fintechs and startups, virtual banks will also gain from this broader access to consumer data.

Three of the consortiums bidding for virtual bank licenses are led by Thai banks – Bangkok Bank, Krung Thai and Siam Commercial Bank. Observers said that the partially-government-owned Krung Thai and monarchy-linked Siam Commercial, are likely to prove winners.

Besides its royal connections, Siam Commercial has partnered with Kokao Bank, South Korea’s leading virtual bank, and WeBank, part of China’s Tencent Group.

“I chose to partner with the bank (Siam Commercial) because they have a long history in Thailand, and they have been very sensible in developing their IT system,” said Daniel Yun, the founder and CEO of Kakao Bank.

KaKao has been the leading digital banking app in Korea since 2019, with total assets of US$43 billion at the end of 2024.

“If you set up a new bank that is 100 per cent digital, and using 100 per cent AI-driven data, then we will offer fantastic new services to our users, that is a different banking experience. This is one of our basic strategies to be successful in Thailand,” Yun told The Business Times.

Another consortium deemed a likely winner of a virtual bank license is the one led by TrueMoney, Thailand’s largest digital wallet app, that is joining forces with Ant, of the Alibaba Group.

TrueMoney, a digital wallet with more than 30 million users, is an affiliate of the CP Group, that also owns True mobile telecom service (about 52 million subscribers), and operates the 7-Eleven retail chain (15,000 outlets throughout Thailand), giving them an immense network on which to build a financial system.

The True Money app even offers interest bearing deposits on its app, through a partnership with Thailand’s Kiatnakin Phatra Bank, which they may well discontinue if they get a virtual bank license, which would allow them to have deposits and make loans on their own.

The third front-runner is the consortium led by Krung Thai Bank, which has partnered Gulf Energy – owner of AIS mobile, with 46 million subscribers – and PTT Oil and Retail, which operates the Amazon coffee chain in 2,225 PTT petrol stations nationwide.

Among the groups striving to get a virtual bank license are some of the biggest cash cows in Thailand, which are likely to get fatter once they diversify into banking, observers said.

“The big will get bigger but at least the BOT is finally doing something,” said Chonladet, a reference to the “open data” push that will benefit smaller fintech players. “It’s better than nothing.”