This comes from the growing digital banking trend in Southeast Asia, which has seen an influx of financial technology firms entering the market. 

The Bank of Thailand (BoT) has stated that it will assess the applicants’ qualifications in several areas, including their financial status, to ensure that they are fit to operate in the digital banking sector. The approved digital banks will go through a “restricted phase” during their first years of operation.

This is part of a broader effort to regulate the digital banking industry and prevent potential harm to consumers or the economy.

In addition to Thailand, other Southeast Asian countries that have approved digital banking include Singapore, Malaysia, and the Philippines. 

These countries have recognised the potential benefits of digital banking, including increased access to financial services for people who are currently unbanked, lower costs for consumers, and increased competition in the financial services industry.

Cautious in digital banking approaches

However, they have also been cautious in their approach to digital banking, with each country implementing different regulations to ensure that the sector is appropriately regulated and that consumers are protected.

However, digital banking is not without its challenges. One of the biggest challenges is ensuring the security of customers’ personal and financial information. Digital banks must implement robust security measures to protect their customers’ information from cyberattacks, data breaches, and fraud.

This includes implementing anti-money laundering (AML) and know-your-customer (KYC) measures. This is crucial to prevent digital banks from being used for illegal activities, such as money laundering.

Other digital banking challenges to consider

Another challenge is ensuring that the sector is regulated to protect consumers. This is particularly important in Southeast Asia, where a large portion of the population is unbanked, and there is a financial exclusion risk. The BoT has stated that digital banks must comply with the same regulations as traditional commercial banks. 

This includes regulations on customer protection, data privacy, and responsible lending practices. This is a positive step towards ensuring that digital banking is accessible and safe for all consumers, regardless of their financial status or background.

Additionally, digital banks must ensure that they provide fair and transparent services to their customers. They must ensure that their customers understand the terms and conditions of their services and that their customers’ rights and interests are protected.

Finally, digital banks must also ensure that they are financially sound and able to withstand economic shocks. This requires them to have a solid financial base, robust risk management systems, and a well-designed business model that is sustainable in the long term.

The Bank of Thailand has stated that it will assess the financial status of digital banks to ensure that they can operate safely and responsibly. This includes assessing their capital adequacy and liquidity position.

 It is essential to ensure that digital banks are not exposed to excessive risk and can continue providing financial services even in challenging economic conditions.

Firms showing interests

The BoT has announced plans to issue three licenses for digital banks and is expected to announce the names of the approved licence holders in the middle of 2024.

Several firms have already expressed interest in entering the digital banking sector in Thailand, including SCB X, the holding company of Siam Commercial Bank, Super-app Grab, Singapore’s internet giant Sea, and partners telecom operator AIS and Krungthai Bank. 

These companies have a significant presence in the region and have the financial resources and expertise to establish themselves as influential players in the digital banking sector.

In addition, Jay Mart, a SET-listed firm, has also expressed interest in entering the digital banking sector and has partners in the form of KB Financial Group, a South Korean financial service provider.

This shows a significant demand for digital banking services in Thailand and that the sector is poised for growth in the coming years.

For the unbanked and underbanked

Despite these challenges, the digital banking sector has the potential to bring significant benefits to the Southeast Asian economy. For example, digital banking can increase access to financial services for people who are currently unbanked, thus reducing financial exclusion and inequality. 

Additionally, digital banking can provide consumers with a range of financial services at a lower cost, thus reducing the financial burden on households. 

Furthermore, digital banking can increase competition in the financial services sector, which can drive innovation and improve the quality of financial services.