SCB X Plc is teaming up with KakaoBank to set up a consortium to apply for a virtual bank licence from the Bank of Thailand.
SCB X, which is the financial technology conglomerate and holding company of Siam Commercial Bank, signed a cooperation agreement with KakaoBank, the largest digital bank in South Korea, to set up a consortium. SCB X holds the majority of shares and KakaoBank holds at least 20%. There is a plan to attract additional partners to promote greater competitiveness.
The agreement was made as it prepares to apply for a virtual bank licence from the central bank, said Arthid Nanthawithaya, chief executive of SCB X.
He said income inequality remains a big problem in Thailand, as many people cannot access financial services. Virtual banking is meant to serve this underserved segment, said Mr Arthid.
"Thai virtual banks will play a pivotal role in allowing the underserved population to access financial products and services conveniently and safely," he said.
KakaoBank's expertise is in managing virtual bank businesses. The company's potential in financial technology should enhance SCB X's competitiveness, said Mr Arthid.
By leveraging digital technology, a virtual bank can provide better access to financial services for lower-income earners, while reducing operating costs for the banking industry, he said.
Yun Ho Yong, chief executive of KakaoBank, said the collaboration with SCB X would benefit both Thais and its existing customers in Thailand and beyond. KakaoBank hopes to replicate in Thailand its success in the South Korean retail banking market, he said.
KakaoBank is the biggest mobile-first bank in South Korea. It has offered its digital banking service since April 2017.
A banking industry source who requested anonymity said competition for the virtual bank licences is intense. Many firms in the financial, tech and telecom sectors have expressed an interest in applying for a licence, including partnerships between Advanced Info Service and Krungthai Bank, and between Jay Mart and KB Financial Group, a South Korean financial service provider.
Charoen Pokphand Group is also expected to join the fray.
The central bank postponed the issuance of virtual bank regulations from the first quarter until the third quarter of this year because it wants more time to clarify the business licensing with related parties. The regulator is offering three licences for new business operations in the first round, in line with its original plan.