Financial markets/Financial institutions :Banking Channels

Overview

• The channels through services are offered are of the utmost importance to the banking business. It is through these channels that deposits are accumulated and loans are made and through which other financial services and products, such as insurance and mutual funds, are provided. There are many types of channel, including, for example, branches, and electronic channels such as ATMs, Internet and mobile banking, and call centers. Because of the importance of these channels, their quantity significantly influences the bank's competitive potential and modes of doing business. For example, when foreign banks were permitted to set up one branch (with ATMs), it became clear that these branches depend less on deposits than did Thai banks. In the same way, their offerings of individualized products such as credit cards and personal loans depends more on sales teams than on waiting for customers to make the initial contact.

• Branches and other channels of banking services have changed and developed a great deal since the economic crisis of 1997, along with changes in structure and business models. Centralized credit investigation was implemented so that branches no longer made the decision whether or not to approve loans. Rather, the role of branches is now to sell products and services and to act as a channel for customers to conduct financial transactions.

• These changes in the role of bank branches were positively influenced in a number of ways. First, changes in consumer behavior, especially increasing familiarity and skill with high technology and lifestyle shifts towards increased individualism and self-reliance. Second, the declining cost of technology; for example, the cost of an ATM has declined from almost a million Thai baht (30 thousand USD) before the 1997 crisis to about 100 thousand THB (three thousand USD). The reduction in technology costs together with lower costs for carrying out a transaction has motivated Thai banks to rapidly increase the number of electronic devices and to emphasize technological development, encouraging customers, particularly the large base of middle and lower class customers, to access services through electronic channels as an alternative to the older style branch counter. Meanwhile, the tendency is towards more and smaller branches distributed among local communities, reaching more customers at lower initial cost per branch.

• As of April 2009, full-service Thai banks held a 99-percent share of the branch banking market; three restricted Thai banks held 0.7 percent of the market, 15 branches of foreign banks held 0.3 percent and one foreign subsidiary 0.1 percent. About 70 percent of branches offer full service; the remaining 30 percent are likely to be small and located in areas with a great deal of retail activity, for example in department stores and malls. Bangkok has the most bank branches at 33 percent, followed by the rest of the Central Region at 31 percent. The North, Northeast and South each have 11 or 12 percent of the total number of bank branches.