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Virtual Banks are Coming to Thailand
26/04/2024
Virtual banks could potentially revolutionise the financial sector in Thailand, providing a genuine and more accessible option for banking for start ups and investors in Thailand. As part of their plans to introduce Virtual Banks to Thailand, the Bank of Thailand has announced plans to open applications for companies to apply for virtual bank licences. These virtual banks aim to provide innovative financial services and increase access to banking for consumers in the retail and SME segments.
Key points
-
Bank of Thailand has announced plans to allow companies to apply for virtual bank licenses, potentially boosting the presence of online banks in the region.
- Virtual banks, also referred to as online banks, operate entirely through digital channels like websites and mobile apps, without any physical branches, often with lower fees compared to traditional banks.
- Key features include online account opening, digital transactions, remote customer support, and advanced technology utilization.
- For businesses, virtual banks provide advantages like multi-currency accounts, checking accounts, debit card issuance (which traditional Thai banks typically offer only after 3 years), and potentially faster account opening.
- The licensing process will be overseen by Thailand’s central bank and finance ministry.
What is a Virtual Bank?
Virtual banks offer greater accessibility, convenience, and flexibility for customers. Customers can access a wide range of financial services through mobile applications, eliminating the need for visiting a physical branch.
The key characteristics of a virtual bank include:
No physical branches
Online banks, also known as virtual banks, operate solely through digital channels, such as websites, mobile apps, and online banking platforms. They do not have any physical branch locations where customers can visit and conduct transactions.
Online account opening
Customers can open bank accounts, including checking accounts, and apply for various banking products and services entirely online or through mobile apps.
Digital transactions
All banking transactions, such as deposits, withdrawals, fund transfers, bill payments, and loan applications, are conducted through online banking platforms and mobile apps, which is a characteristic feature of online banks.
Remote customer support
Virtual banks typically provide customer support through digital channels, such as email, live chat, video conferencing, or phone support, rather than in-person interactions.
Advanced technology:
Virtual banks heavily rely on advanced technologies, such as artificial intelligence, machine learning, and data analytics, to provide personalised services, enhance security, and improve operational efficiency.
Virtual banks have become more and more popular in recent years due to the increasing adoption of digital technologies and the changing preferences of customers, particularly among younger generations who prioritize convenience and digital experiences.
What are the Benefits of a Virtual Bank?
Virtual banks offer greater accessibility, convenience, and flexibility for customers. Customers can access a wide range of financial services through mobile applications, eliminating the need for visiting a physical branch.
The process for opening an account is also greatly simplified as it can all be done online via uploading the required information. This is the opposite of opening an account in a Thai bank which requires a Director to be there in person and also all the original documents and copies of everything. However, approval for opening an account in a physical branch is granted almost immediately, some virtual banks may take up to a week to approve an application.
Virtual banks also offer significant advantages for businesses including the ability to have a multi currency account. More importantly, virtual banks also offer their customers access to debit cards, which could be very important for newly started companies. Typically Thai banks will only issue a debit card to companies after they have been incorporated for 3 years.
What is the Current Status of Virtual Banks in Thailand?
In March 2024, Thailand’s Finance Ministry announced that it will begin to accept applications for virtual bank licenses, considering the impact on interest rates over the next six months.
The licensing application process for virtual banks in Thailand will be overseen by the central bank and the finance ministry. Applicants will be evaluated based on:
- their experience and resources to ensure their ability to operate a commercial banking business effectively.
- Their ability to handle transactions, protect customer data, and comply with regulatory requirements.
Once the submission period ends, the central bank and finance ministry will review the applications within nine months, assessing factors such as capital requirements, fees, and the potential impact on interest rates. Approved banks will then have one year to prepare and begin operations.
The authorities have not set a limit on the number of licences that will be issued, but they will consider the overall impact on the Thai financial institutions system.
What are the Requirements to Open a Virtual Bank Account in Thailand?
While the details about what will be required to open a virtual bank in Thailand have not been announced yet, judging by the requirements from Hong Kong and Singapore virtual banks, we can expect the requirements to be similar to opening a traditional bank account in Thailand.
What are the Requirements to Open a Traditional Bank Account in Thailand
Typically the following will be required for opening a corporate bank account:
- Copy of the company’s registration certificate
- Stamped minutes of the board of directors meeting authorising the opening of the account and designating the signatories for payments and closure of the account
- The tax ID card of the company
- ID card or passport of every member of the board of directors and shareholder who holds more than 25%
- Copy of the articles of association and memorandum of association
- Shareholder’s list
- A minimum deposit of THB 500 (may differ between banks)
Please be aware that the following additional documents may be required:
- a work permit (if the Director opening the account is a foreigner),
- company records,
- tax details and
- personal financial information
Virtual Banks in Other Countries
Virtual banking has become a popular option in two leading global business and finance hubs, Singapore and Hong Kong. Both these countries have been at the forefront for providing a legal framework for virtual banking in Asia.
The virtual banking framework established in Hong Kong is overseen by the Hong Kong Monetary Authority (HKMA). The HKMA issued its first virtual banking licence in 2018 and since then has continued to develop and support the virtual bank business environment.
In Singapore, the Monetary Authority of Singapore (MAS) is responsible for overseeing the regulation of virtual banks. The MAS awarded its first four virtual banking licences in 2019. The MAS offers two types of licences for virtual banks to offer banking services in Singapore.
Holders of a Digital Full Bank licence can offer services to retail customers, while the Digital Wholesale Bank licence allows business banking, and covers other non-retail customer segments.
Examples of Virtual Banks in Singapore and Hong Kong:
- GXS Bank (Singapore)
- ANEXT Bank (Singapore)
- Ant Bank (Hong Kong)
- Mox Bank (Hong Kong)
- ZA Banks (Hong Kong)
Virtual Bank Alternatives:
The following examples are not classed as Banks but are considered a financial institution and hold a Money Service Operator licence in Hong Kong and the Singapore equivalent. Such companies offer essentially the same services as a traditional bank and are focused on businesses and supporting their needs.
While the details relating to virtual banks in Thailand remain unclear at this time, we expect it to provide great opportunities for businesses, potentially affecting interest rates similarly to the impact seen in Hong Kong and Singapore. The improved accessibility to banking services and innovative products, Virtual Banks could have a significant positive effect on business and conducting business in Thailand.
How can Belaws help?
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Frequently asked questions
How do virtual banks operate?
Virtual banks, also known as digital banks, primarily operate through online platforms, eliminating the need for physical branches.
By utilizing the latest technology, they provide various financial services including savings accounts, loans, and investment options. Customers can access these services through mobile apps or websites, ensuring convenience and efficiency that traditional banks might lack.
Advanced encryption and cybersecurity measures safeguard client information. As they do not maintain physical locations, operational costs are lower, allowing for competitive interest rates and reduced fees, thus benefiting the end-users significantly.
Integration with other digital financial services helps create a seamless ecosystem for users. Virtual banks continuously innovate, striving to enhance user experience with features like AI-driven financial advice, instant payments, and personalized banking solutions, marking an evolutionary leap in the banking industry.
Are virtual banks safe?
Virtual banks have emerged as a groundbreaking innovation in the financial sector, poised to reshape traditional banking landscapes. These digital-only institutions leverage cutting-edge technology to offer seamless and convenient banking experiences. Consequently, they are attracting a growing number of customers seeking efficiency and accessibility.
Despite this popularity, concerns about security remain a central issue. Advanced encryption and multi-factor authentication are standard measures employed by virtual banks. These features ensure the safety of clients’ financial transactions and personal data. Additionally, digital banks must adhere to stringent regulatory requirements.
Many virtual banks employ machine learning algorithms to detect and prevent fraudulent activities. These systems continuously monitor transactions, identifying unusual patterns and addressing potential threats in real-time. By leveraging artificial intelligence, virtual banks enhance their security measures significantly.
Furthermore, virtual banks invest heavily in cybersecurity, often collaborating with leading experts in the field. They conduct regular security audits and penetration testing. These preemptive measures help identify and mitigate vulnerabilities, providing an additional layer of protection.
Trust in virtual banks is bolstered by their partnerships with established financial institutions and fintech firms. These collaborations often involve sharing best practices and adopting innovative security technologies. Together, they create a robust ecosystem that further ensures customer trust and safety.
What we can say is that virtual banks employ state-of-the-art security measures to protect against cyber threats. Their commitment to security and regulatory compliance remains unwavering. As digital banking continues to evolve, these institutions are well-equipped to provide a secure and efficient banking experience.
Which services do virtual banks offer?
Virtual banks are revolutionizing the financial landscape by offering a diverse array of services. They aim to provide comprehensive solutions beyond traditional banking limits, appealing to tech-savvy users.
Firstly, virtual banks offer fully digital checking and savings accounts. These accounts often come with higher interest rates and lower fees, attracting those who seek more efficient financial growth.
Additionally, they provide seamless payment services. Customers can easily transfer money, pay bills, and manage transactions in real-time, utilizing advanced mobile applications and web platforms.
Moreover, personalized financial management tools are a significant draw. Virtual banks use AI-driven analytics to monitor spending, set savings goals, and even offer tailored investment advice.
Customer support is also commendable. Virtual banks ensure assistance through chatbots, live chats, and 24/7 helplines, ensuring users receive timely and efficient help anytime.
Why is Thailand introducing digital banks now?
While many Asian countries already have digital banks, Thailand is just starting. There are two main reasons:
- Financial inclusion: To reach people who don’t have easy access to traditional banks.
- Increased competition: To create a more competitive banking sector and potentially improve services for everyone.
Does everyone in Thailand need a digital bank?
No, not everyone. Thailand already has a high rate of bank account ownership (over 80%). However, some people may be underbanked, meaning their existing bank accounts don’t meet all their needs.
What is franchising, and why is it popular in Thailand?
Franchising allows an established business (franchisor) to grant another party (franchisee) the right to operate a business using its brand and systems. In Thailand, franchising is popular due to its established legal framework, potential for market expansion, and proven business models.
What are people in Thailand interested in with digital banks?
A study showed strong interest in using digital banks for:
- Making deposits and withdrawals (72%)
- Transferring money (67%)
- Paying bills (64%)
Source: kapronasia
Who will likely get the digital bank licenses?
Startups are unlikely due to high capital requirements. Winners are expected to be established players like:
- SCBX-Kakao Bank consortium
- Kasikornbank subsidiary
When will digital banks be available in Thailand?
Not before 2025, and possibly even later in 2026. The application and approval process takes time.
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