The banking landscape in Thailand is set to undergo a significant transformation as three consortiums have been awarded virtual bank licenses.
These consortiums are expected to invest up to 5.7 billion baht within the first year of operation to develop digital platforms and offer products similar to existing mobile banking services. The Bank of Thailand is expected to issue these licenses by mid-next year, with a mandate for the recipients to commence operations by mid-2026.
Each consortium is anticipated to allocate between 1 billion to 1.9 billion baht during the initial 12 months for essential IT systems and other capital expenditures. The total capital expenditure required before the virtual banks can begin operations is estimated to be between 3 billion and 5.7 billion baht.
The five applicants vying for the virtual banking licenses include notable partnerships such as Krungthai Bank with Advanced Info Service and PTT Oil and Retail Business, and SCB X collaborating with South Korea's KakaoBank and China's WeBank. Other contenders include an alliance of Bangkok Bank, VGI, Sea Group, Sahapat Group, and Thailand Post, as well as Ascend Money, which is backed by Ant Group and CP Group, and Lighthub Asset in partnership with WeLab, a pan-Asian fintech platform.
The consortiums are expected to focus on creating digital platforms that offer a range of products akin to those available through mobile banking. With only a year to invest before launching operations, heavy capital expenditure is anticipated in the latter half of 2025 and the first half of 2026. This investment is crucial for establishing the necessary infrastructure to support the virtual banks' operations and to ensure they can compete effectively in the evolving financial landscape.
As virtual banking operators prepare to enter the market, the emphasis will be on developing highly automated loan application and approval processes. This shift towards automation is expected to streamline operations and enhance customer experience, making banking services more accessible and efficient. Additionally, mobile applications will likely incorporate value-added services, creating an ecosystem of points and privileges that can attract and retain customers.
The virtual banking sector will require ongoing capital expenditure even after the initial launch for maintaining IT systems, introducing new products and features, and improving scalability. The experience of KakaoBank, a leading digital bank in South Korea, serves as a benchmark, with an average capital expenditure-to-revenue ratio of 3.3% from 2018 to 2023, indicating the need for continuous investment in technology and infrastructure.
The anticipated surge in investment for virtual banking is expected to benefit technology firms such as Bluebik Group (BBIK) and Beryl 8 Plus (BE8), both of which are recognized for their expertise in the banking technology sector. Bluebik is poised to play a crucial role in product design, development, and mobile app creation, ensuring that virtual banking products align closely with the needs of retail customers. Their capabilities in project management will also be vital in keeping virtual banking projects on track regarding budget, quality, and timelines. Beryl 8 is expected to generate revenue through the implementation of customer relationship management platforms, software integration, call center systems, and cybersecurity solutions. As virtual banks ramp up their operations, the demand for these tech services will likely increase, providing a significant opportunity for these firms to expand their market presence and enhance their service offerings.
The introduction of virtual banks in Thailand marks a pivotal moment in the evolution of the financial services sector. As these consortiums prepare to invest heavily in technology and infrastructure, the competitive landscape is set to shift dramatically. The focus on digital platforms and automated processes will not only enhance customer experience but also drive innovation within the banking industry. With the backing of established financial institutions and fintech partnerships, the virtual banking initiative is poised to redefine how banking services are delivered in Thailand. As the sector evolves, stakeholders will need to remain agile and responsive to the changing needs of consumers, ensuring that they can capitalize on the opportunities presented by this digital transformation.