As the high-income market approaches saturation, Kasikornbank (KBank) is shifting its customer acquisition focus to the lower-income segment, where strong demand for financial services remains.
The country's third-largest bank by assets believes that the new strategy can help it weather digital disruption in the industry.
Lower-income earners living in secondary provinces are a new market segment for banks, KBank president Patchara Samalapa said in an exclusive interview with the Bangkok Post.
Some 20 million people living in Bangkok and major provinces with high purchasing power can access banking services and are fully banked, while banks are at a loss as to what new financial services to offer them, Mr Patchara said.
He acknowledged that commercial banks in the past ignored the unbanked, who form a majority of the country's population, as remote banks need more resources, which leads to higher operating costs to serve them and, most importantly, carries higher risk.
"Amid digital disruption, we need to transition ourselves onto the digital platform," he said. "KBank aims to expand users of K Plus [the digital banking app] to 10.4 million by the end of the year. However, we've realised that it isn't easy to achieve the goal because most people in Bangkok and first-tier provinces have already used it. Let's say the upper-market segment is quite saturated."
KBank is the country's largest mobile banking service provider, with more than 8.4 million users of its K Plus.
KBank launched the mobile banking app in 2013, and it has delivered dramatic growth of 90-100% annually over the past five years with 2.6 million users in 2015, 4.6 million in 2016 and 7 million last year.
With the exponential growth and larger base, it won't be easy to maintain a similar growth pace going forward, Mr Patchara said.
To brace for disruption, which is increasingly putting banks in the firing line, banks will battle for customers and adopt innovative technologies to analyse their behaviour and offer customised financial products to serve individual needs.
KBank's latest effort to nudge existing customers onto the digital platform and lure new ones is waiving fees for banking transactions over digital channels for interbank and cross-clearing zone money transfers, bill payments and top-ups.
Moreover, the launch of a basic bank account with fee-free deposits and no minimum balance requirement will help banks better access the unbanked.
A central bank survey found that 30% of Thai households in 2016 were unable to access financial services, up from 20% three years earlier.
No-fee digital banking transactions, implemented since late March, are another pressure point for banks' fee-based income, so expanding the customer base is the main strategy that will sustain the industry, but it's also a key challenge, Mr Patchara said.
To enter the lower market segment, the bank needs to revamp the entire existing operation, he said.
In upcountry markets, key players are local small non-bank financial companies, including motorcycle leasing firms. Ease, familiarity and access are their key success points, through they charge higher interest rates than banks do.
There are a lot of under-served people, Mr Patchara said, and the bank can't reach them yet because they lack confidence in the bank's branches.
Unbanked people perceive bank operations as complicated and hard to understand, and banks have a lot of requirements and an image as untouchable, he said.
"We need to change the mindset of our branch staff," he said. "They should speak the same language as customers. That means helping them understand by simplifying financial language."
Mr Patchara has visited branches across the country to understand the pain points of the brick-and-mortar channel.
Although KBank has closed many traditional branches over the past few years, it has no plans to lay off any employees, as they are an important resource for the bank.
The number of KBank branches fell to 1,034 at the end of June from 1,110 at the end of 2016.
Mr Patchara, appointed as one among KBank's four presidents on April 4, oversees retail, small and medium-sized enterprises and corporate banking. His appointment led to a shake-up in internal operations in terms of process and workforce, and several high-ranking executives resigned or were reshuffled.
"Certainly the revamp hurt some people," he said. "Some colleagues aren't quite happy and they don't appreciate me. But change is crucial for survival in the long run."
Beyond changing the internal operating process, he has also adjusted key performance indicators of the branch network under the "One Team One Target" banner. The bank's KPIs are based on overall provincial branch performance, rather than the target of each product under the previous KPI standard.
"Change is so hard, and we can't call it a success yet because it's still ongoing," Mr Patchara said.
