AIS banking on digital venture with SCB
Mobile firm seeks new revenue stream
Advanced Info Service (AIS), the country's largest mobile operator by subscriber base, says a joint venture it will establish with Siam Commercial Bank (SCB) will create a new revenue stream from innovative financial services, particularly digital lending, which has seen a tremendous surge in demand.
On Tuesday, AIS and SCB announced a plan to establish a joint venture -- AISCB -- to focus on digital financial services, such as loans. AISCB, with a registered capital of 600 million baht, will be held at a ratio of 50:50 by AIS and SCB.
According to AIS, the move underscores the company's position as a digital service provider under the concept of "digital platform for Thais", opens the door for new core revenue streams and helps tackle the loan shark problem in the country.
AIS chief executive Somchai Lertsutiwong said despite mobile service serving as a core business, the company is sharpening its focus on digital services to catch up with digital trends and changes in lifestyle and the business landscape.
By 2024, AIS's mobile services could make up 70% of its total revenue, a decline from 85% now, and the rest will come from fixed broadband, enterprise business and digital business, he said.
AISCB will help Thais gain access to digital financial services and create new growth engines for both AIS and SCB.
According to Mr Somchai, AIS has been developing its digital credit rating model through a data analytic system for five years.
Nanofinance services require precision of data, especially personal credit scores of consumers who demand access to the loan, he said.
The digital lending service is expected to be launched early next year, he said, adding the company is now in the trial process of the system.
No conclusions have been reached about applications subject to the digital lending but it is likely that customers will be able to gain access to the service through myAIS app, SCB Easy App and a new app from AISCB, he said.
"With the increasing adoption of digital technology in many industries, the new company will focus on creating innovative financial services through digital channels for optimal benefits to customers, while bridging the technological gap to enable access to financial services for even more Thais amid the rapid changes taking place," said Mr Somchai.
The new company will provide digital lending before expanding to other financial services, he said.
AIS, Mr Somchai said, has collaboration with several banking partners with each partnership focusing on different categories of financial services.
Pisut Ngamvijitvong, senior equity research analyst at Kasikorn Securities (KS), said AIS's new digital lending business looks positive with an increase of 0.02-0.05 baht in earnings per share and 0.26-0.64 baht per share in value creation.
AIS's investment of 300 million baht accounts for only 1% of its annual capital expenditure, he said.
According to KS's research, AIS could utilise this digital lending platform to facilitate its mid- to low-tier customers in upgrading to smart devices. This will in turn boost customer retention.
Also, AIS's customers will have better accessibility to financial services and a competitive borrowing rate through its customer database and credit profile analysis.
Lastly, AIS will also be able to provide financing to its dealers and distributors via a nanofinance scheme, it indicated.
AISCB's direct competitor will be Line BK, a social banking platform in Thailand formed by a collaboration between Kasikornbank (KBank) and Line Corporation. Line BK has a total estimated loan portfolio of 9 billion baht.
According to KS, AIS's expansion into financial services is a positive move at least in terms of market sentiment but it was not excited about this joint venture.
First, AIS's joint venture with Line and VGI through Rabbit Line Pay is not very successful with some lending limitations, it said.
AIS has invested 778 million baht in Rabbit Line Pay since 2018.
Another criticism is that a joint venture with a major bank will limit AIS's move to disrupt financial services effectively, KS indicated.