After operating for more than two years, Line BK, a social banking collaboration between Kasikornbank (KBank) and Line Corporation, aims to book a net profit in 2024.
More data development is needed to facilitate business expansion in the long run, said Tana Pothikamjorn, chief executive of Kasikorn Line, which operates Line BK.
Line BK started operations in October 2020 and is now a leader in the Thai digital loan business.
Though the business grew during the pandemic, Mr Tana identified several tasks to strengthen the platform amid tough competition.
Existing services
He said while Line BK is a digital loan pioneer in the Thai market, the company competes with proven players in the mobile banking sector, which has become significantly more competitive.
The national payment infrastructure PromptPay, which was introduced in 2018, has been a driving force for the surge in users, financial volume and banking transactions on digital platforms. In addition, the pandemic encouraged mobile banking adoption in Thailand.
Mr Tana said it was challenging for Line BK to begin operations during the pandemic, even though the company started with a large customer base.
He said it was not an easy task to attract Line users, who already used other mobile banking apps.
One advantage of social banking platforms is users find them informal, compared with the solemnity of financial transactions on mobile banking apps, said Mr Tana.
In addition, he said many consumers are familiar with the Line chat app, meaning the company only needed to provide more simplicity and convenience to attract users.
Line BK did not innovate any new financial services, offering the same deposits, loans and money transfers as existing players. The company stood out because it focused on a new segment -- underserved clients -- said Mr Tana.
It is difficult for traditional banking services and channels to access the unbanked and underbanked segments, even when they demonstrate higher loan demand, he said.
Banks need more resources for operations to expand to the underserved segment, increasing costs, especially for risk management and loan-loss reserves, said Mr Tana.
Inadequate data about unbanked and underbanked customers is a key factor contributing to higher risk in the segment.
"The underserved segment has no bank statements, financial documents, or even credit records at the National Credit Bureau. This segment gets pushed towards loan sharks and unsecured lending services," he said.
Small-pocket clients
Banks typically finance existing customers, as they have longstanding relations with these clients and years of data on their payment activities. Using a traditional loan analysis, new clients who apply for bank loans have a high chance of being rejected, said Mr Tana.
KBank set a clear business direction for accessing the underserved segment, or small-pocket clients, as the bank calls them. Using Line's ecosystem, KBank leverages customer scale and data to support business growth, he said.
The venture also allows Line to expand to financial services.
In general, customer data on a mobile app stems from the frequency and volume of use. An "active" user spends at least two hours a day on an app and social media platforms tend to have more active users and customer data than banking apps, said Mr Tana.
"The main service on mobile banking apps is transactions, which only take a minute for money transfers or payments. They create less customer data than social media," he said.
Ongoing data development
Mr Tana said the company will continue to develop data in line with changing consumer behaviour and environments. Line BK is searching for new patterns, fine-tuning designs, and upgrading data analytics to understand clients better, he said.
The firm has been trying to capture customer data related to their willingness and ability to pay back debt, said Mr Tana.
The company wants to develop data that allows it to know customers' social networks, including their friends and relatives, enabling the firm to learn about behaviour related to their willingness and ability to pay back debt, he said.
Mr Tana said the company updates, upgrades and tests existing data in preparation for business operations. For instance, a lot of data collected during the pandemic may not be useful now because of rapidly changing consumer behaviour, he said.
Line BK wants data development to be ceaseless, said Mr Tana.
"Our data development is at a primary level, so we have many ongoing goals. Line BK will also focus on artificial intelligence development this year," he said.
Data development should span the whole loan approval process, said Mr Tana. In addition to responding to customer demands, data development can help the company control its asset quality, he said.
Loan approval is not an area of concern amid higher demand, especially from the underserved segment. Risk management is more important and it can affect business performance, said Mr Tana.
The debt collection process is another area that needs improvement, he said. Digital loans are offered online, but debt collection is mainly conducted by people.
Line BK has embedded digital methods in the debt payment alert system to improve debt collection, and this area requires further development, Mr Tana said.
Ambitious goal
Line BK aims to acquire 1 million new users this year, in addition to its existing network of 5.3 million, and targets 5 billion baht worth of new loans. The business expansion would help increase the company's total outstanding loans from the current 18 billion baht.
The company focuses on all customer segments with loan demand, with users a mixture of salaried workers, freelancers and underserved segments, he said.
Line BK offers two loan products: personal loans for individuals and nano-finance for entrepreneurs. Personal loans represent 75% of the total client portfolio, with 25% from nano-finance.
On the deposit side, the company offers digital savings accounts, transactional banking services and debit cards.
Line BK plans to offer insurance products in the third quarter this year, starting with health insurance in collaboration with Muang Thai Life Assurance.
"The business expansion will contribute to the company's income, with a net profit expected in 2024," Mr Tana said.
The Bank of Thailand's upcoming virtual bank licences are expected to create more challenges in the digital banking business. The winners of three virtual bank licences are expected to be large business operators with big data.
"Businesses that use big data, such as those in the telecom and retail sectors, are likely to have an advantage," he said.
Line BK wants to focus on its own business development and monitor the market, said Mr Tana. In addition to generating a net profit by 2024, the two major shareholders in the company have no plans to list Kasikorn Line on a bourse, he said.