The country's two largest banks are igniting a price war by promising customers free digital channel transactions for life, as they vie to secure the most market share in the rapidly growing online banking sector and lure back customers who have defected to e-commerce companies' wallet solutions.
These schemes, banks hope, will also keep consumer data out of the hands of competitors, which will allow them to build long-term engagement with customers and cross-sell services more effectively.
SCB, Thailand's second-largest lender, recently cancelled its online transaction fees. The bank is also the country's second-largest digital banking service provider with 6.5 million mobile banking users.
Hours after SCB announced free lifetime transactions, Kasikornbank (KBank) announced a similar scheme whereby the bank, starting from Wednesday, is providing consumers free cross-border transactions, bill payment and refill products for life, which are among the bank's most popular services.
Previously, KBank announced it would offer the services free of charge for one year only.
Customers can now perform all of their banking transactions through its mobile banking app, SCB Easy. The services cover cross-area fund transfers, interbank fund transfers, bill payment, top-ups and cardless money withdrawal. The no-fee services have been in place since March 26.
Thana Thienachariya, SCB's chief marketing officer, said the no-fee services will impact the bank's fee income, but also build its long-term engagement with customers, allowing it to cross-sell services more effectively.
The free services will also facilitate the expansion of users making transactions through SCB Easy.
"We spend 1,000 baht in marketing to acquire one new client," Mr Thana said. "If we get 1 million new customers, it's worth offering no-fee services."
The bank aims to increase the number of SCB Easy users to 10 million by year-end, up from 6.5 million users. After relaunching the app five months ago, transactions made through the channel increased to 220 million, or 80% of the bank's total.
SCB plans to log 12 million cardless withdrawals and 75,317 lending applications this year, Mr Thana said.
KBank announced it will eliminate fees for a lifetime for funds transfers, top-ups and bill payments made through the online channel. The online channel covers the bank's individual and SME mobile banking apps.
The channel also covers internet banking for both individual clients and SMEs (K-Cyber and K-Cyber SME). The company said lower fees will help it increase the volume of online transactions by 6 billion by the middle of the year.
Last year, there were 8.1 million K Plus users, with total deposits of 6.3 billion baht. There are 1.7 million K-Cyber users, with total deposits of 1.7 trillion baht. There are 440,000 K Plus SME users, with 200 billion baht in deposits, and 43,000 K-Cyber SME users, with 400 billion in deposits.
KBank executive vice-president Patchara Samalapa said the "no fee" services will impact the bank's income immediately and affect fee-based income for this year. Income of transactional banking services represents 10-15% of the bank's total fee-based income.
The bank's fee and service income was 51.75 billion baht in 2017. But the free services will help online banking users and allow the bank to expand the number of K Plus users to more than 10 million by year-end.
"Transactions via K Plus more than doubled Wednesday to 25,000 transactions per second after the announcement of the no-fee services," Mr Patchara said. "Normally there are 12,000 transactions per second."
KTB, the country's third-biggest bank, is also offering fee-free traditional banking services until the end of the year.
Before the implementation of the "no fee" schemes, banks usually waived the fees of the first five cross-area fund transfers and charged 10 baht per transaction thereafter.
Cross-bank fund transfer charges are in the range of 25-35 baht per transaction.
Business as usual
Piyachart Ratanaprasartporn, chief executive of 2C2P Pte, a leading e-payment gateway provider, said the banks' plans will drive mobile payments share of e-payments to over 50% this year.
Previously, ATM, counter service and mobile/online payment held equal shares.
"This is a big decision for banks," Mr Piyachart said. "The move will help bank retain customers, but will lead them to lose billions of baht in fee revenue."
Moving forward, financial institutions will leverage customer data to find new sources of revenue, including online loans.
"Counter payments will be hit the hardest, but the scheme will make non-bank e-payment solutions less attractive to users," he said.
Some medium-sized banks will follow in the next six months, Mr Piyachart said.
The rise of QR payments in SMEs will also encourage consumer use of mobile payments.
Fee reductions will stimulate the development of a cashless society by familiarising consumers with digital money, said Pratthana Leelapanang, chief consumer business officer of Advanced Info Service, which owns payment platform MPay.
"The measure will not impact non-bank players because they offer a variety of bill payment and money transfer services, coupled with attractive promotions and small or no fees," Mr Pratthana said.