BoT sets out plan to issue up to 3 virtual banking licences
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BoT sets out plan to issue up to 3 virtual banking licences

The Bank of Thailand plans to grant up to three virtual banking licences in the first stage of its digital plans, and will allow both financial institutions and non-financial firms to apply.

The central bank plans to provide a list of up to three qualified licence holders to the Finance Ministry for approval. The bank said three was an appropriate number to generate competition in the industry and to allow effective supervision.

The ministry and the Bank of Thailand plan to closely monitor the operations of the new licence holders. The central bank said it will consider more licence applications in the future if additional players meet the requirements of virtual banks.

The Bank of Thailand kicked off public hearings for a consultation paper on the virtual bank licensing framework yesterday, which will run until Feb 12. The central bank plans to finalise the virtual bank regulations in the first quarter of this year, assistant governor Tharith Panpiemras said yesterday at a media briefing.

Then the central bank plans to allow licence applications in the second quarter, with the process lasting six months.

Mr Tharith said the Bank of Thailand expects to take another six months to consider the business models and feasibility of the applicants, before submitting the names of qualified licence holders to the Finance Ministry, which will take three months to consider the companies.

The ministry is expected to announce the names of the approved licence holders in the middle of 2024. The licence holders will be given one year after obtaining the licences to prepare for the launch of operations, which is expected in the second quarter of 2025, according to the central bank.

The development of virtual bank licences is based on existing commercial bank licences. However, the central bank is focusing on supervision of virtual banks to ensure they provide excellent digital banking services, he said.

The central bank wants virtual banks to offer a full range of financial services catering to all customer segments, particularly unserved and underserved groups, as well as small and medium-sized enterprises.

Virtual banks will have to manage their digital banking services professionally, with glitches of no more than eight hours a year, according to the Bank of Thailand. If a problem occurs, virtual banks must solve it within two hours, Mr Tharith said.

Virtual banks are not allowed to set up physical branches, ATMs or cash deposit machines, and have to mainly provide services on digital channels. However, they can collaborate with business partners such as financial institutions, post offices or convenience stores to offer cash services, he said.

Moreover, the central bank requires virtual banks to have minimum registered capital of 5 billion baht on the day operations start. The central bank is allowing all qualified business operators to apply for a licence through several models, such as a single business operator, a joint venture between local partners, or a venture between local and foreign partners.

Foreign investors wanting a joint venture with a local partner will be allowed to own a 25% stake, but they can ask the Bank of Thailand to consider raising this to up to 49%. The central bank will consider this on a case-by-case basis, said Mr Tharith.

The central bank plans to closely monitor and supervise the virtual banks during the first 3-5 years to ensure smooth operations.

The applicants will have to propose an exit plan. If an approved virtual bank cannot operate as planned, they will have to return the licence to the central bank and exit the business, he said.

"There are around 10 business operators that indicated an interest in applying for licences, both financial institutions and non-financial companies," Mr Tharith said.

Many banks are keen to apply for the licences to explore greater business opportunities. Krungthai Bank recently revealed it was partnering with telecom operator Advanced Info Service on a plan to jointly invest in a virtual bank, to serve both existing and new customers.

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