KBank takes on challenger banks with fintech to reach grassroots
Thailand’s most profitable bank is taking on so-called challenger banks at their own game, vowing to adopt their fintech DNA to tap the loan market of grass-roots and first-time borrowers.
KBank CEO Kattiya Indaravijaya said its heavy investment in technologies and business partners is bolstering the bank’s defence against digital disruption by reaching out to Thais and SMEs who previously had no access to bank loans.
KBank is investing about 100 billion baht to develop technologies, purchase fintech firms and cut deals with business partners.
The first quarter this year saw KBank outperform all rivals with a net profit of Bt11.211 billion, up 5.5 per cent from a year earlier.
“Now, our strong points are second to none and we have stability and credibility. We can answer the demands of all groups of clients,” Kattiya said while outlining the path ahead for KBank.
“What we are doing now is to integrate the DNA of challenger banks, which have been successful in disrupting conventional banks.”
Competition from challenger banks
Leading fintech research company Burnmark says there are three types of challenger banks.
First are the Embryonic Challengers – who operate through mobile apps in partnership with banks.
Second are the Real Challengers – who have received banking licences and use mainly digital channels to engage with customers.
Third are the Pseudo Challengers – digital start-ups of existing banks.
Burnmark says challenger banks are more competitive because they have much lower costs, as well as low risks since their products are based on a customer-centric approach.
In 2015, UK challenger banks recorded combined profits of 194 million pounds against a drop of 5.6 billion pounds for the top five UK banks (Barclays, HSBC, Lloyd’s, Royal Bank of Scotland and Santander), according to KPMG International.
Kattiya conceded that challenger banks are now rocking the banking industry worldwide by using new technologies to reach out to people.
She said challenger banks attract customers by eliminating complicated procedures via simple and easy-to-use services that can be accessed anytime, anywhere.
However, KBank had learned their strong points and adopted them, she added.
“We now regard ourselves as the first bank in Thailand with the nature of a challenger bank because we have integrated their DNA into our services.”
One aim is to place financial services and advice within easy reach of the creative and dynamic new generation, the CEO continued.
“We want to reach out to more people with our loans, which do not need collateral.” Loan approval is based instead on customers’ ability to repay the debt. They can also apply from the comfort of their home or workplace. “We want to get rid of procedures and paperwork and make everything as simplest and fastest as possible.”
She said KBank’s new challenger DNA was also helping the grassroots, freelancers and micro-businesses escape the jaws of loan sharks.
KBank will invest 22 billion baht in new technologies and systems this year, adding to the 12.7 billion it has spent over the past two years, she added.
It will also invest about 30 billion baht to buy or partner with up to five businesses over the next 12 months.
The benefits of this tech push are already being felt by customers, said Kattiya.
For example, opening a new bank account online takes just a few minutes for current customers (new clients have to wait 24-72 hours for ID checks).
Meanwhile, those with online accounts can apply for loans without visiting a branch. Once approved, loans are credited to their accounts within 30 minutes.
Kattiya pointed out that this process used to take weeks. And the 30-minute loan service will soon be extended to customers who don’t have accounts with Kbank.
The bank is also pioneering so-called “buy-now-pay-later” loans for freelancers and people without a fixed income. The new service is approving about 1,600 loans per day averaging Bt1,500 with a maximum of Bt20,000.
It has also partnered with Line to offer loans to low-income people, freelancers and people nervous about visiting branches. The Line BK loan service uses algorithms and social media data to approve loans within five minutes for existing customers and 24 hours for those without a KBank account.
A third of Line BK customers are first-time borrowers while almost half are freelance workers or earn less than Bt15,000 per month. The service aims to extend loans to 200,000 people this year.
Kattiya added that the bank is in talks to provide collateral-free loans to small vendors and their customers upcountry.
