Kasikornbank's (KBank) digital lending got off to a good start with 500 million baht worth of unsecured loans being extended to individuals and small and medium-sized enterprises (SMEs) in the first quarter.
The bank, which began digital lending service in the final quarter, loaned 250 million baht evenly to retail and SME customers during the January-March quarter, said senior executive vice-president Wirawat Panthawangkun.
In the initial stage, the unsecured digital lending, to which data analytics technology is applied, is only offered to the bank's current customers on a selective basis. The bank extended personal loans to around 10,000 retail customers since the service was rolled out.
Under risk-based pricing, some customers are charged an interest rate of 8-9% per year. The ceiling rate under the central bank's rules is 28%.
"With positive signs from digital lending, we could see personal loan growth in the double digits this year, up from the current target at 6-8%," he said.
Despite the double-digit lending growth estimate, the loan amount would not be significant because of its small base, said Mr Wirawat.
However, it would open more opportunities for the bank to expand the customer base for high-yield loan products and help compensate for its forgone revenue from scrapping digital transaction fees.
Data-driven lending, which uses both people and automation for loan approval, is another innovative instrument to generate new income.
The bank's new SME loans amounted to 20 billion baht extended through the programme last year and it is aiming for a higher amount this year. This is a key strategy to grow high-yield loans to generate new income, he said.
"We need to search for new sources of income from both traditional financial services on the digital platform and new services via traditional channels. The strategy requires spending more time on this search to generate new income," said Mr Wirawat.
KBank, the country's third-largest lender by assets and No.1 in mobile banking service, with total users of more than 8 million, was dealt a hard blow when it adopted the no-fee scheme for internet and mobile banking transactions.
Shortly after the bank waived digital transaction fees, it cut its non-interest income growth outlook for 2018 to a contraction of 6-8% from zero growth previously.
Even though waiving digital transaction fees is taking a toll on the bank's financial performance, both mobile banking transactions and volume have surged and its operating costs will fall in the long term, he said.
Around a week after implementation of the no-fee scheme, transaction volume via K Plus increased by 30-50% to 1.9 trillion baht at the end of March, said Mr Wirawat.
He said the bank aims for total retail loan growth of 5-7% this year, with contributions from mortgage growth of 6-8%, credit card loan growth of 4-6%, and personal loan gains of 6-8%.
The bank's total credit cards in circulation number 2.5 million and it is the industry's leader in credit card spending at 370 billion baht.