Thailand is on the verge of a major transformation of its banking sector thanks to the introduction of virtual banks.
The Bank of Thailand launched a licensing process designed to promote financial inclusion and deliver innovative banking solutions, primarily through digital channels.
The regulator's application window closed on Sept 19 and five business groups, namely Gulf Energy Development, SCB X Group, Ascend Money Group, Sea Group and Lighthub Asset, submitted their proposals for virtual bank licences.
The central bank intends to grant only three licences in the initial phase.
The majority of the applicants are large, well-established companies with extensive national reach, and many have formed strategic partnerships with both local and international firms.
For example, the Gulf consortium includes Gulf Energy Development, PTT Group and Krungthai Bank.
The SCB X consortium is made up of SCB X, the holding company of Siam Commercial Bank (SCB); KakaoBank, South Korea's largest digital bank; and WeBank, a global digital bank renowned for its advanced technology.
The Ascend Money consortium is a financial technology firm backed by the Charoen Pokphand Group.
Meanwhile, the Shopee consortium is led by Sea Ltd, the parent company of Shopee, along with partners such as Bangkok Bank, VGI (an advertising and financial services arm of BTS Group), Saha Group and Thailand Post.
A consortium comprising Lighthub Asset and WeLab has also submitted an application for a virtual banking licence.
According to Chayawadee Chai-anant, the regulator's assistant governor for corporate relations, the central bank is issuing three virtual bank licences in order to maintain the stability of the domestic financial market and protect depositors from risks associated with new business ventures.
The central bank expects virtual banks to begin operations by the middle of 2026, aiming to foster innovation in financial services, particularly for unbanked and underbanked populations, in order to promote financial inclusion.
Kris Chantanotoke, chief executive of SCB, Thailand's oldest bricks-and-mortar bank founded 117 years ago, said while the introduction of virtual banks would intensify competition in Thailand's banking sector, SCB is not overly concerned.
The bank already started transitioning to digital banking via AI adoption through its "Digital Bank with Human Touch" strategy.
Despite this, Mr Kris said the high level of household debt remains a significant hurdle for both traditional and virtual banks in the retail sector.
The regulator's requirement for virtual banks to serve unbanked and underbanked populations is a key condition for obtaining a licence, posing a significant challenge for the new entrants, he said.