Bangkok: Virtual banks are reshaping the financial sector in Thailand as the Ministry of Finance and the Bank of Thailand have granted licenses to three major capital groups to provide banking services through smartphone applications and websites.
According to Thai News Agency, the Deposit Protection Agency (DPA) highlighted in an article titled 'Branchless Banks, Virtual Banks: A New Alternative in the Digital Age That is Changing the Financial Game' how digital technology is revolutionizing banking. The move from physical branches to virtual banks is driven by consumers' demands for convenience and speed, allowing transactions to be conducted seamlessly via digital platforms. These virtual banks are set to offer a range of services, including account management, money transfers, loan applications, and investments, leveraging technologies such as artificial intelligence, big data, and blockchain to ensure efficiency and security.
Globally, branchless banks are making significant inroads into traditional banking markets. In the UK, banks like Monzo and Starling Bank have captured nearly 30% of the population, illustrating the rapid growth and acceptance of branchless banking. Monzo boasts over 11 million users, while Starling Bank has surpassed 4.2 million users. These banks are expanding rapidly, offering features like credit score-based payments, automatic cash-back, and integration with online shopping and social media services to enhance customer experience.
The rise of virtual banks is facilitated by increased internet and smartphone accessibility. However, challenges remain for consumers and SMEs who face barriers in accessing credit or efficient services. Successful models like China's WeBank and MyBank benefit from integration with platforms like WeChat and Alibaba, utilizing AI, big data, and blockchain to support extensive customer bases and streamline loan processes.
The absence of physical branches allows virtual banks to offer competitive advantages, such as low or no fees and favorable interest rates. In the UK, some virtual banks offer interest rates of 2-3% on deposits, surpassing the 0.5-1% typical of traditional banks. The use of AI in risk analysis also speeds up loan approvals.
Despite the benefits, virtual banks face challenges, particularly in data security. The entirely online nature of their services makes them vulnerable to breaches. Intense competition has led to the closure of some virtual banks, such as Australia's VOLT Bank and the US-based B³, due to financial constraints and customer acquisition challenges.
In Thailand, the recent approval of Virtual Banks marks a significant advancement in modernizing the financial system. The three approved groups-ACM Holding Company Limited; Krungthai Bank Public Company Limited in collaboration with Advanced Info Service and PTT Oil and Retail Business; and SCB X Public Company Limited with WeTechnology Limited and KakaoBank Corp.-have a year to prepare for service rollout. The initiative aims to enhance financial accessibility for underserved groups, including SMEs and low-income individuals, while promoting diverse and modern financial services. With this development, Thailand's financial sector anticipates reduced costs, accelerated services, and improved financial equality.