Retail News CRM

Tag: digital banks

  • Report: Thailand’s Emerging Virtual Banks Face Steep Challenges Against Established Players

    Report: Thailand’s Emerging Virtual Banks Face Steep Challenges Against Established Players

    Despite the buzz surrounding the rise of virtual banks, Thailand’s existing financial institutions appear to retain a safe buffer against potential disruption, at least in the near term. Moody’s Ratings recently indicated that the new entrants, set to launch in 2026, will navigate a landscape defined by regulatory restrictions that could curtail their growth over the next three to five years.

    Regulatory Framework Shapes Future Operations

    The Bank of Thailand’s (BOT) licensing framework will require these virtual banks to gradually increase their capital from THB5 billion ($153 million) to at least THB10 billion ($306 million) during their formative years. This regulatory structure aims to foster stability in the financial sector as these banks target segments that traditional institutions often overlook.

    Filling the Gaps in Financial Services

    These digital newcomers will primarily focus on lending to underserved populations, including lower-income retail clients, self-employed individuals, and small businesses. By catering to these niche customer groups, they may actually act as a shield for incumbent banks, delaying any immediate threats and allowing these traditional players time to adapt.

    Meet the New Players in Thailand’s Banking Scene

    Thailand’s Ministry of Finance has officially green-lighted three applicants to establish virtual banks, following rigorous evaluations alongside the BOT. The selected players include ACM Holding Company, part of the Charoen Pokphand Group, a consortium of Krung Thai Bank, PTT Oil, and Advanced Info Service, and another consortium including SCB X, KakaoBank, and WeTechnology, backed by WeBank.

    Leveraging Partnerships for Competitive Edge

    What these virtual banks lack in physical branches, they more than make up for in strategic partnerships. As Moody’s points out, the SCBX consortium stands to gain significantly from the operational experiences of KakaoBank and WeBank in South Korea and China, respectively. Simultaneously, the KTB consortium could leverage the market dominance of AIS and PTT Oil, major players in telecommunications and energy.

    A Competitive Arena Awaits

    Competition in this space is expected to be fierce, with incumbent banks not resting on their laurels. Many have stepped up their digital offerings, diversifying into areas like micro-financing and wealth management, though these segments currently contribute modestly to their overall revenue. “It’s not just about getting on the digital bandwagon; it’s about driving the innovation that sets new entrants apart,” Moody’s asserted.

    Challenges on the Horizon

    The launch of PromptPay, Thailand’s real-time retail payment system, has already transformed the speed of fund transfers and payments, adding further pressure on these new virtual banks to innovate. Compounding the challenge is Thailand’s high household debt and stagnant economic growth, a tougher landscape compared to the more favorable conditions faced by virtual banks in other Southeast Asian markets.

    As Thailand readies for an evolution in its banking system, both incumbents and new players will need to navigate a rapidly shifting terrain filled with opportunities and obstacles alike. One thing is certain: the quest for customer loyalty is about to get more exciting.

    Questions & Answers

    What regulatory hurdles will virtual banks face in Thailand?
    Virtual banks in Thailand will be required to increase their capital from THB5 billion to at least THB10 billion and will operate under certain restrictions for 3-5 years.

    Who are the major players in the new virtual banking landscape?
    The three approved virtual banks are ACM Holding Company (part of CP Group), a consortium including Krung Thai Bank and PTT Oil, and another consortium featuring SCB X, KakaoBank, and WeTechnology.

    How will existing banks respond to the rise of virtual banks?
    Incumbent banks are enhancing their digital offerings and expanding into micro-financing and wealth management to maintain their competitive edge against new entrants.

  • Malaysia’s Digital Banks Struggle with Slower Loan Growth Amid Rising Costs

    Malaysia’s Digital Banks Struggle with Slower Loan Growth Amid Rising Costs

    Malaysia’s digital banking landscape is shifting, as the nation’s new players in the sector are reassessing their approaches to deposit gathering amidst challenges in lending growth, which has turned out to be more costly and sluggish than initially projected, according to a recent report from UOB Kay Hian (UOBKH).

    Digital Banks Adjust Strategies Amid Slower Growth

    As of now, three of the five licensed digital banks in the country—GXBank, Boost Bank, and AEON Bank—are operational, while Ryt Bank and KAF Digital Bank are still in the pilot phase. The slow scaling of lending activities has been a significant hurdle for these digital lenders. Their target market consists largely of underserved and unbanked Malaysians, who present unique operational and credit risks.

    UOBKH analyst Keith Wee Teck Keong highlighted the complications: “Many in this segment may lack the digital literacy to engage fully with app-based platforms, while their credit profiles may raise asset quality concerns,” he stated in a report dated June 24, 2025.

    The Ripple Effect on Deposits

    In light of these lending challenges, digital banks are likely to pull back on their deposit-gathering efforts. Wee pointed out that taking an overly aggressive stance in collecting deposits without a corresponding growth in lending could lead to negative carry. This scenario would see expensive deposits funneled into low-yielding money market instruments, squeezing profit margins.

    For conventional banks, this situation may present a silver lining, as the reduction in deposit competition could ease pressure within the broader banking ecosystem. Currently, none of the digital banks have reached profitability, and Wee notes that those that have begun operations estimate it could take over three years on average to reach breakeven.

    The Leaders of the New Wave

    Among the newcomers, GXBank Bhd stands out, boasting both the highest assets and customer deposits. As of September 2024, the bank reported total assets of MYR2.4 billion and deposits totaling MYR2.2 billion. EAON Bank trails with MYR711 million in assets and MYR339 million in deposits reported in November 2024, while Boost Bank has MYR819 million in assets and MYR573 million in deposits as of March 2025.

    Although these figures are promising, Wee cautions that the combined asset base of these three operational digital banks remains modest, representing less than 1% of Malaysia’s total banking sector assets, which were pegged at RM3.7 trillion as of late April 2025.

    Even under the regulatory cap of MYR3 billion per digital bank for their first 3-5 years, the cumulative MYR15 billion ceiling reflects just 0.4% of the industry’s total assets, leaving plenty of room for growth and opportunity for these nascent financial institutions.

    Questions & Answers

    What challenges are Malaysian digital banks facing?
    Digital banks in Malaysia are encountering significant hurdles in scaling their lending activities due to targeting underserved segments that often lack digital literacy and have questionable credit profiles.

    How have digital banks responded to lending growth challenges?
    In response to the costlier and slower growth in lending, digital banks are expected to temper their deposit-gathering strategies to avoid negative carry and maintain healthier profit margins.

    Which digital bank currently leads the market in assets and deposits?
    GXBank Bhd leads among operational digital banks in Malaysia, with total assets of MYR2.4 billion and deposits of MYR2.2 billion as of September 2024, showcasing a considerable market presence.

  • SG Digital Banks Venture into Investments and Loans to Drive Profit Growth

    SG Digital Banks Venture into Investments and Loans to Drive Profit Growth

    Digital banks in Singapore are striding confidently into the future by expanding their portfolios with higher-margin products like investments and loans, but two years after their debut, they still face significant challenges. A recent report from Simon-Kucher highlights that while these digital entities have garnered attention, they remain in the red due to high acquisition costs clashing with a troubling number of inactive accounts.

    Curiosity versus Commitment

    One major hurdle for these banks is the surprising number of accounts that remain dormant. “Many customers open accounts out of curiosity but fail to fund them—especially in Singapore, where the process is streamlined with tools like Singpass,” explained Simon-Kucher managing partner Silvio Struebi, alongside partners Alan Lim and David Lielacher. This scenario underscores the challenge of transforming casual curiosity into active engagement.

    Expanding Offerings to Boost Engagement

    In a bid to attract a more engaged customer base, digital banks are broadening their service offerings. MariBank, for instance, has recently unveiled investment options, becoming the first digital bank in Singapore to do so. This innovative move is expected to pave the way for Trust and GXS to introduce similar features in 2025. Simon-Kucher suggests that integrating investment solutions into a more comprehensive, customer-centric product lineup could help digital banks deepen their impact.

    Building Broader Ecosystems

    Many digital banks are already nested within larger ecosystems, like Trust Bank’s partnership with NTUC or GXS’s collaboration with Grab and Singtel. However, the report emphasizes that to truly grow, these banks must seek expansion beyond their initial ecosystems. Recognizing this necessity, GXS and MariBank are now reaching out to sole proprietorships and micro-businesses, often overlooked by traditional banks.

    These small enterprises share some characteristics with retail clients but typically come with heightened risks and costs for established banks. “We observe a financing gap in the MSME and SME segment, where business customers struggle to access loans at reasonable rates,” the report noted. Digital banks, buoyed by their tech-driven models, could potentially offer more affordable options, sidestepping the liquidity constraints that traditional lending platforms often face.

    Moreover, digital banks possess a unique advantage in monitoring customer payment behaviors, which helps them gauge the liquidity health of MSME clients. By also providing supplementary services—ranging from payment terminals to invoicing solutions and cybersecurity offerings—they can carve out a valuable niche in this underserved market.

    As digital banks navigate this complex landscape, they hold the promise to not only expand their own foothold but also empower a wealth of small businesses in Singapore.

    Questions & Answers

    What challenges are digital banks in Singapore currently facing?
    They are contending with high acquisition costs and a significant number of inactive accounts, which has kept them in the red for the past two years.

    What strategies are digital banks employing to attract customers?
    Digital banks are expanding their product offerings to include investments and wealth management services to engage customers more effectively.

    How are digital banks serving micro and small businesses?
    They are reaching out to niche markets such as sole proprietorships and micro-businesses, offering tailored financial solutions and ancillary products to meet underserved needs.

  • Digital Banks Are Not Making it in Singapore

    Digital Banks Are Not Making it in Singapore

    They got here late and when they did arrive, they faced fierce rivalries from strongly entrenched incumbents. And given that they have to follow all the regulations traditional banks do, they are not getting a break from regulators either.

    It was just a short while ago, in December 2020, after months of waiting, that the Monetary Authority of Singapore (MAS) announced four successful digital bank applicants, GXS Bank, owned by Grab and Singtel, MariBank, a unit of gaming and e-commerce group Sea, ANEXT, part of China’s Ant Group; and Green Link Digital Bank (GLDB), held by a consortium comprising Greenland Financial, Linklogis Hong Kong and Beijing Co-operative Equity Investment Fund Management.

    And, they appear to be experiencing much the same fate that neobanks have elsewhere. In short, they won’t put any incumbents out to pasture anytime soon.

    That same view now appears to be forming in the city-state itself, with The Business Times on Thursday also clearly telegraphing the fact in a stark headline that the four new digital entrants are not the game changers they initially promised to be. Their impact on the market has turned out to «be underwhelming, with limited utility for the average consumer», the newspaper indicated.

    From the outset, Singapore intended to avoid any market disruption and regulators required digital banks to provide clear value propositions. Moreover, besides using innovative technology, they also needed to reach under-served segments of the Singapore market.

    That has limited their availability – and impact. GXS Bank, for example, solely takes deposits from a select group of employees and customers, and MariBank is only available to employees of its parent company, Sea.

    Another kind of digital bank, Trust Bank, is showing more impact, which is likely because it is supported by industry incumbents. It has a full bank license and is owned by Standard Chartered and FairPrice Group and only started to take deposits this past September, yet it was in a position to report 400,000 customers by the time the BT article appeared.

    Moreover, another issue could potentially be in one of the key strategies used by digital entrants. Initially, in order to take a larger chunk of the market, Trust Bank and GXS tried offering higher interest rates than the main industry players.

    But they quickly came up against one of the largest interest rate pivot cycles in recent memory, with more restrictive central bank policies worldwide forcing the wider financial industry to successively ratchet up rates in short order.

    Not only have they been too late to the market, but the fact is that most traditional banks have significantly improved their digital offerings in the past two years. Any innovations offered by the new digital banks, such as financial planning and cheaper foreign exchange transactions, have become increasingly common.

    Simon-Kucher’s banking lead in APAC, Silvio Struebi said in the earlier article that digital banks have accomplished a great deal, but that they are not going to be great disrupters.

    It has just provided more options for consumers and prompted vast improvements in traditional banks, Struebi said.

    Lees ook: