Thailand's digital banking shift to boost banks' revenue

The transition will rationalise banks' branch networks and improve cost efficiencies, said Moody’s.

The digital banking shift in Thailand is a good, credit positive long-term revenue strategy for banks that can streamline overall operations, raise cost efficiencies, and expand product and service offerings, according to Moody’s. 

This comes as a growing number of banks have been stepping up their digital strategies when mobile and internet banking hit $747.63b (THB23.4t) over the same period amidst improving mobile penetration, according to data compiled by Moody’s from the Bank of Thailand. 

Kasikornbank, for instance, reports 7.3m users on its mobile banking channel which registered 3b transactions by the end of 2017 which representing a tenfold increase from 2014. 

Similarly, the Bank of Ayudhya (BAY) has expressed that it would invest THB20b to develop a digital banking platform and improve its tech infrastructure, whilst Siam Commercial Bank (SCB) has also pledged to invest THB40b for its digital banking strategies. 

Online transactions also provide banks with the opportunity to rationalise their branch networks and improve operational cost efficiencies, as the credit agency noted the number of commercial bank branches dipping to 6,826 in September 30, 2017 from 7,061 in December 30, 2015. 

It also noted that in January, SCB announced plans to reduce its traditional branches to 400 from 1,153 by 2020, while BAY said it will transform half of its traditional branches into digital or hybrid-digital platforms. BAY expects its investment in IT to result in a 10%-15% decline in operating costs over the next three years.

“Concomitantly, the banks’ annualized cost-to-income ratios declined to less than 52% as of the end of September 2017 from 54% in 2015. In January, SCB announced plans to reduce its traditional branches to 400 from 1,153 by 2020, while BAY said it will transform half of its traditional branches into digital or hybrid-digital platforms. BAY expects its investment in IT to result in a 10%-15% decline in operating costs over the next three years,” noted analyst Rebaca Tan. 

The digital shift will also allow Thai banks to expand their offerings beyond current transactional products and increase their interest income which can combat the risk of competition.

“This will counteract the risk that charges on digital banking channels likely will fall because of competition,” added Tan. 

For example, KBank this year launched its K-Personal Loan service, which calculates interest rates by considering each individual customer’s risk factors to offer customized loan products via its mobile banking application, and SCB aims to make THB10 billion in retail loans through its mobile banking application this year.

Photo from https://www.d103group.com/en/project/kasikorn-bank/