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18 Aug 2023

Financial Institutions

Virtual bank... learning from foreign experiences (Current Issue No.3427)


        KResearch is of the view that it is quite a formidable undertaking to operate virtual banks in Thailand. New players, in particular, may face numerous challenges in terms of income generation, operating cost management, default risk, and most importantly, competition with traditional commercial banks in the market as they have already made significant progress on the development of mobile banking that meets the consumers' needs. It can, therefore, be said that the platform of virtual banks may not create any difference for consumers in conducting key financial transactions although it is anticipated to serve as an alternative for consumers to access financial services.  
        In other countries, successful virtual banks typically have a strong customer base from their existing online platforms under distinct sales point operations and customer targets, depending on the licensing objectives in each country. Moreover, successful virtual banks abroad have sufficient ecosystem to venture into other businesses. This is a crucial component that allows them to operate businesses more sustainably as they can tap into new customer segments while being able to share management costs on some operations. They have also developed a user interface that meets the users’ needs and can continuously create a satisfying user experience.  
        Although the ability of successful virtual banks to secure unbanked and underbanked customers has helped bolster their loan growth, they may still have to shoulder high operating costs, as evidenced in a sample group that has a high cost-to-income ratio. This is an important factor why it remains challenging for virtual banks to maintain profitability.

Financial Institutions