Virtual banks should make convenience paramount to ensure their sustainability, according to a Bank of Thailand article titled "Virtual banks … the next step in Thailand's financial system".
A virtual bank has no physical branches, with only a headquarters while offering regular banking services online.
According to the article, a successful virtual bank should be customer-centric, offering products and services customers want but cannot find with other providers.
For example, such banks should allow customers to conveniently access their services at times and via formats that match with customers' needs.
Additionally, they must offer deposit products with interest rates exceeding the market rate and should use big data systems to evaluate risks when considering extending loans to the underserved.
Data is key to the success of a virtual bank, as rich and diverse data, especially non-financial data, will enable it to analyse customer demand and develop products that answer the specific needs of each individual customer.
Data also provides greater ability to analyse risks, such as those involved with lending, according to the article.
Virtual banks with existing customer bases from their other businesses will have a competitive edge over those building from scratch, as the former has lower customer acquisition costs, said the central bank.
In addition, using the proper technology and having a competent IT staff should help virtual banks succeed in product development on a cost-effective basis and reduce their new products' time to market.
As a virtual bank operates services online using a flexible core banking system, it should gain advantages from lower operating costs compared with traditional banks.
Virtual banks should quickly develop innovative services in response to customers' changing behaviour and diverse demands, according to the article.
The Bank of Thailand found financial regulators in other countries permit virtual banks, but it wants to consider carefully all dimensions before granting permits for such banks.
Central banks or regulatory bodies in many countries allow commercial banks and non-banks, such as fintech, telecom and e-commerce operators, to set up virtual banks in many formats.
A virtual bank delivers all regular banking services online.
As virtual banks are new, they require constant evaluation and regulatory bodies in some countries have limited the amount of deposits they can accept in the initial stages, according to the article. Virtual banks must comply with all the same regulations as conventional banks.
According to the central bank, the primary purpose of establishing a virtual bank in Thailand should be providing more opportunities to households and small businesses to access financial services, especially loans.
Other goals include promoting the development of innovative products that match customer demand and encouraging competition in financial services, which could result in greater efficiency.
The digital disruption the past five years has changed consumer behaviour and expectations in the Thai financial sector, and the Bank of Thailand believes it developed financial infrastructure and rules to gradually push the country towards fully digital banking.
No one size fits all
Parichart Jiravachara, partner for risk advisory services at Deloitte Thailand, said looking at trends in Asia-Pacific, Thailand should offer virtual bank licences to grow the economy and provide better outcomes to customers, particularly during the pandemic.
She said if Thailand can address the key risks, such as cyber-attacks, data leakage, regulatory, privacy, resilience, technology and operations, then she thinks customers are likely to adopt digital banking.
Ms Parichart said each country will have a different digital banking licence frameworks and strategies for financial inclusion to match customer behaviour.
"There is no one size fits all approach, so the services offered will be different in each country," she said.
Nattanan Prungmuangngam, a 20-year-old university student, said she has not visited a bank branch for long time.
She completes financial transactions on a mobile banking app, making a physical bank branch unnecessary.
"The last time I went to a bank branch was around the middle of last year," said Ms Nattanan.
At that time, she visited the branch to close her savings deposit account.
Inconvenience and waste of time were the reasons Ms Nattanan listed for avoiding a brick-and-mortar branch.
She completes most basic financial transactions on an app, such as money transfers, bill payments and online shopping.
If Ms Nattanan needs some cash, she completes the withdrawal at an ATM using a mobile banking app because she does not own an ATM or debit card.
Nowadays financial transactions can be done on a mobile banking application, without the need to visit a physical bank branch.