Kiatnakin Phatra Securities (KKPS), a subsidiary of Kiatnakin Phatra Financial Group, expects virtual banks in Thailand to incur losses during the initial stage of operations due to the regulatory framework governing the sector.
KKPS anticipates local virtual banks will record net losses in their early years of operation, primarily because of stringent regulatory requirements. Based on the experience of virtual banks in overseas markets, the first-year return on equity is typically negative, averaging -29%.
Among Thailand's three licensed virtual banks, Clicx Bank, a joint venture between Krungthai Bank, Advanced Info Service (AIS) and PTT Oil and Retail Business (OR), is scheduled to launch on Friday as the country's first virtual bank.
Bank X, established through a partnership among SCB X, South Korea's KakaoBank and WeBank, is preparing its internal operations and is expected to commence services by year-end.
Ascend Bank, backed by Charoen Pokphand (CP) Group, is in the process of complying with the Bank of Thailand's regulatory requirements.
Under central bank regulations, virtual banks are subject to the same regulatory standards as traditional commercial banks, with an emphasis on infrastructure development and risk management.
According to KKPS, these requirements are expected to limit asset growth during the early stages of operation and could delay the path to profitability.
"We estimate virtual banks will incur operating losses during their initial years of business. However, the impact on their parent companies' earnings in 2026 is expected to be limited to around 1-3%," the brokerage noted in its report.
During the initial phase, KKPS expects virtual bank operators to focus on building infrastructure, strengthening risk management capabilities and ensuring regulatory compliance. As a result, business expansion is likely to proceed gradually.
Clicx Bank is expected to leverage the customer databases of AIS and OR to expand lending through alternative credit-scoring models.
Bank X is expected to focus on digital lending powered by artificial intelligence technology while maintaining a low cost-to-serve model.
Meanwhile, Ascend Bank is expected to capitalise on CP Group's extensive customer base and integrated business system to drive growth.
Based on KKPS's study of 12 virtual banks across five economies -- the US, the UK, Brazil, China and South Korea -- the firm identified two key factors behind successful virtual banking operations: supportive regulatory frameworks and strong business capabilities.
In addition, the ability to leverage an existing customer base or business system to expand into new services is considered another critical success factor.
According to KKPS, long-term success is unlikely to be driven by aggressive price competition or rapid loan growth, but rather by execution capability, effective use of data and the ability to integrate seamlessly within each group's structure.
