Thailand’s big corporations scramble for virtual bank licenses

BANGKOK — The Thai financial market is heating up as big corporations seek partners in the scramble for one of the three virtual banking licenses that the Bank of Thailand plans to grant next year.

Several listed companies have formed teams in order to compete in the multibillion-baht digital banking business.

Giant Thai telecom operator Advanced Info Service (AIS) has partnered with leading energy provider Gulf Energy Development and state-owned Krungthai Bank to develop a business model and apply for a virtual banking license.

Gulf and AIS on Feb. 6 demonstrated their efforts to prepare as they announced their cooperation with Singapore telecom operator Singtel in the construction of a giant data center in Samutprakan province, adjacent to southern Bangkok. The data center is aimed at serving the increased demand from enterprises and cloud service providers in Thailand and abroad that the digital banking business is expected to bring.

Thailand’s Charoen Pokphand Group is also interested in opening a virtual bank. A senior government official and analysts said the agricultural conglomerate is expected to optimize its nationwide 14,000-branch network of 7-Eleven convenience stores or even use the vast customer base of its telecom subsidiary True to raise deposits for running a virtual bank.

Dhanin Chearavanont, Thailand’s richest man and the senior chairman of CP Group, and his son Suphachai Chearavanont, the group’s chief executive officer, reportedly met with Alibaba founder Jack Ma over the Lunar New Year holiday in Hong Kong, and in early January Ma also was spotted at a Michelin-starred restaurant in Bangkok with Dhanin Chearavanont’s eldest son, Soopakij Chearavanont, the chair of CP Group, sparking speculation in Thailand that the Chinese billionaire may be involved in CP’s virtual banking strategy.

Jay Mart, a giant mobile retailer and holding company for technology investments, said it was interested in digital banking and was about to search for partners for a license, according to the company’s CEO, Adisak Sukumvitaya.

Thailand’s oldest conventional banking group, SCB X, also jumped into the ring, with CEO Arthid Nantwawithaya saying it was studying the Bank of Thailand’s guidelines on virtual banks and would look for partners if it wanted to invest.

Thailand was the third country in ASEAN, after Singapore and Malaysia, that entered virtual banking at a time of digital disruption that had forced many businesses to go online, including banking.

The Bank of Thailand’s virtual bank licenses are aimed at promoting digital banking platforms that let small- and medium-size borrowers get loans easier, faster, more safely and at lower cost. This necessitates a system of stringent monitoring by the regulator and efficient, secure digital platforms that require strong business models and massive investments, according to the central bank.

Virtual banks take deposits and make loans online, with no branch offices, automatic teller machines or cash deposit machines.

They are distinct from consumer lending companies, which the Bank of Thailand started licensing in 2019, allowing private companies to make personal loans in amounts of up to 20,000 baht ($596) per loan and repayment periods of up to six months.

“I think the BOT wait for the right timing to promote the virtual bank at this time,” Naris Sathapholdeja, an economist at Bangkok-based TMBThanachart Bank, told Nikkei Asia.

“Thailand has just gone through the COVID-19 pandemic. It would be no good to kick off virtual bank business at a time that every sector was suffering losses and demand was weak,” he added.

The Bank of Thailand has issued a consultation paper on the virtual bank licensing framework as part of its hearings into the creation of virtual banks as new financial service providers. Eligible companies must submit their business models by the end of March.

All private companies — nonbanking business as well as existing conventional lenders — are eligible to apply.

The Bank of Thailand is expected grant licenses to successful candidates by mid-2024.

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