Thai digital banks urged to rethink playbook

They should acquire customers from the get-go with profit in mind.

Digital banks in Thailand should ditch the traditional “acquire now, make money later” if they want to start making money soon, analysts said, in a market where only a fifth of about four-dozen so-called neobanks in Asia are profitable.

They should acquire customers profitably from the get-go instead of luring them with deals, Chalee Asavathiratham, president at Singapore-based fintech group Lightnet Group, told the Asian Banking & Finance and Insurance Asia Summit in Bangkok this month.

“Digital banks are a hard business,” he said, noting that only nine of 45 banks in the region are making money. Less than 5% of the more than 400 standalone digital banks worldwide are profitable, according to Simon-Kucher & Partners.

“If you follow the traditional playbook of platform business — acquire first then figure out how to turn a profit later — that was usually true 10 years ago, but right now it’s a money-losing game,” said Asavathiratham, who is also a senior advisor for the Lightnet-WeLab consortium.

“Think from day one how to acquire customers profitably,” he said. “How do you produce products that will generate a positive cash flow as soon as possible?”

Hong Kong-based WeLab is one of the groups vying for a digital bank license in Thailand, whose central bank is set to issue three virtual bank licenses in mid-2025. The group broke even late last year. 

Managing costs is another factor that successful digital banks in the region have in common, according to Dalad Tantiprasongchai, chief operating officer and international business officer at SCB X Public Co. Ltd.

“The other is the customer experience, the value proposition that you bring to the market,” she told the summit. “It's all about risk management, both across credit risk management and end-to-end risk management across the virtual banking engine as a whole.”

SCB X is part of another group consortium vying for a digital bank licence in Thailand.

Dalad said technological expertise is important, adding that virtual banks should be clear about how their products could add value.

“Everyone that has a mobile phone probably has all the banking apps already,” said Ittiphan Jearkjirm, executive vice president of digital business at Gulf Edge Co. Ltd. “And I believe that they have more than one.”

Panel members led by moderator Kevin Kwek, a partner and head of Financial Institutions Group for Southeast Asia at consulting firm Kearney, agreed that one of the biggest challenges digital banks face is sustaining growth.

They also said the market would have to look at Thailand's approach to digital banking differently; it won’t be about giving deals.

“I don't think I will ever target you as a potential customer in the digital bank that we're going to build,” Asavathiratham told Kwek, who had noted that mobile-savvy, banked customers do not end becoming loyal customers once a deal or promotion has ended.

“The virtual banks that we're creating are meant for the underserved,” he said. “We’re talking about the people who don’t have an easy time accessing credit from the banks.”

“These are the people who are probably going out of informal sources of funding — loan sharks, or some other means. These are the people who do not even want to put their money in the bank,” Asavathiratham added. 

Dalad said it’s easy to grow one’s loan book very quickly “but it’s hard to do that in a sustainable or profitable way.”

“The problem that we are seeing in Thailand is structural — people rely on informal lending and loan sharks,” she said. “This is something that we as a consortium and my colleagues here want to solve collectively as participants of the virtual banking game.”