Thailand will soon be the next Southeast Asian country to allow fully digital or virtual banks, with the release earlier this month of the central bank’s rules, procedures, and conditions for the application and issuance of a virtual bank licence.
Bank of Thailand (BOT) will start accepting applications for virtual banking licences in the country on March 20, Somchai Lertlarpwasin, assistant governor of the financial institutions policy group, BOT, says in a statement.
Highlighting its vision for virtual banks to provide financial services to the unserved and underserved segments of society, the BOT says it invites applicants “with expertise in technology, digital services, and the utilization of diverse types of data to provide financial services with new value propositions via digital channels” to apply for the licence.
Prospective virtual banks will have to have proven experience, resources, and capability in operating the business, as well as a capability to offer financial services with new value propositions to better serve the needs of each customer segment.
Applicants also need to show their expertise, experience, and capability in operating a digital-driven business that offers services through digital channels, as well as a capability to use and manage IT systems in an “agile, secure, resilient and high-availability manner” in order to accommodate the development of financial services in response to customers’ changing situations and needs.
Other requirements also include experience and capability to acquire, manage, and utilize diverse types of data; develop data portability mechanisms to facilitate customers’ use of their personal data in transacting with other financial service providers under their legal rights; and manage risks of financial business.
Appropriate number
While the BOT did not state how many virtual bank licences will be up for grabs, it did say that it would “ensure an appropriate number of new virtual banks with the said potential and capabilities”.
This comes after the BOT conducted lengthy consultations with numerous stakeholders in the country. The central bank expects to announce successful applicants by the first half of 2025, and give them one year to prepare to launch their offerings.
Thailand is following in the footsteps of Asean neighbours Malaysia, the Philippines, Singapore and Indonesia, as well as other Asian countries such as Hong Kong, Taiwan, mainland China, South Korea and Japan to allow virtual banks, or banks with no physical bank networks.
“It is expected that virtual banks will bring about better customer experience and stimulate a healthy competition in the Thai financial institution system, without posing risks to financial stability or causing harm to depositors and wider consumers,” Somchai says.
While there are no virtual banks licensed in Thailand yet, there are already several lenders that have embraced a digital-forward approach to banking, offering similar products as virtual banks in neighbouring countries.
With the announcement of the BOT, more players can enter the space, giving Thais, about 63% of whom remain unbanked or underbanked, more options to manage their money and enter the formal economy.
