Thailand’s Virtual Bank raises debt question after overseas cases

Thailand’s household debt situation remains a matter to watch, even though the ratio of household debt has fallen from a previous high of 92% of gross domestic product (GDP) to 86.7%, or about THB16.6 trillion.

However, there are still trends and pressures that could push household debt above its current level.

At a press conference on Thai social conditions in the first quarter of 2026 held by the Office of the National Economic and Social Development Council (NESDC), or the state planning agency, Danucha Pichayanan, secretary-general of the NESDC, said the issue of household debt monitoring now included a new factor that could accelerate a rise in household debt in the future: the launch of “branchless commercial banks” (Virtual Banks), which are beginning to emerge in Thailand.

Virtual Banks may need to be monitored for possible increases in debt creation.

NESDC is concerned that branchless banks may raise household debt

The Bank of Thailand’s policy to allow branchless commercial bank providers is an important approach to expanding public access to financial services, particularly for groups that still lack access to traditional credit services.

The services are provided through digital systems and use data from digital systems both inside and outside the financial sector, such as payment data, online trading records and utility bill payment histories, in loan assessments.

This helps reduce the limitations of traditional credit services and gives the public more opportunities to access funding.

However, the risks of increased debt creation may also need to be considered, as seen in cases overseas.

Bangkokbiznews compiled examples of situations in countries where Virtual Banks have already been introduced and have affected household debt and increased borrowing among the public.

They include:

1. The Philippines: Digital banks were found to have clearly higher non-performing loan (NPL) ratios than traditional banks. Digital banks in the Philippines use data from digital systems both inside and outside the financial sector, or Alternative Data, such as payment data or online trading records, to assess loans. Although this increases opportunities for more people to borrow, there is also a high risk of excessive borrowing if borrowers lack financial discipline.
2. China: Online lending services have encouraged people to spend more, while some borrowers have entered debt cycles more easily.
3. Brazil: Data as of May 2026 showed that more than 82 million Brazilians were in arrears. The figure represented nearly half of the country’s entire adult population experiencing late debt repayments. The main causes were the combined pressure of high interest rates and the rapid expansion of fintech companies, such as Nubank, which made credit too easy to access and exceeded people’s repayment capacity.
4. South Korea: Digital banks, such as KakaoBank, have led the growth of unsecured personal loans (UPL). In the first three years, this type of lending in the system rose by 31%, with 28% of the increase coming from digital banks.
5. Kenya and Tanzania: In the two countries, digital loans often carry very high interest rates, in some cases above 100% a year, causing many borrowers to face repayment difficulties. In Kenya, 54% of digital loan borrowers were found to have a history of arrears, while in Tanzania, 47% of borrowers had to cut food consumption to use the money to repay debt.
6. Finland: Foreign digital banks entering the market focused on high-interest personal loans through digital channels. Loans issued to Finnish households rose by more than 200% within just two years, from 2016 to 2018.
7. The United States: A large number of “buy now, pay later” (BNPL) services are available, as one form of digital credit. Users are often young people with high debt burdens and low credit scores, with default rates higher than those for traditional credit cards.

The main reasons branchless banks can easily increase public debt are:

1. Easy and fast access: loans can be requested via mobile phone in real time, 24 hours a day.
2. The use of Alternative Data, such as online trading histories, allows underbanked groups that previously lacked access to credit to borrow more easily.
3. The use of psychology and technology: platforms are often designed to encourage fast decisions, or Instant Gratification, or use AI to offer products targeted to consumer behaviour.
4. The debt consolidation trap: research from Harvard indicates that borrowers who take out digital loans to consolidate credit card debt often return to using credit cards, leaving them with two debt burdens. This causes the risk of default to surge by as much as 25% compared with those who borrow from traditional banks.

Kobsak says initial lending will not be large

Kobsak Pootrakool, director and senior executive vice-president of Bangkok Bank Public Company Limited, said the emergence of Virtual Banks in Thailand in the initial phase, around the first four to five years, was likely to remain relatively small.

Initial lending was expected to be about THB50 billion, which, compared with large commercial banks, may not have an immediate broad impact.

The THB50 billion amount is considered very small compared with large commercial banks.

For example, compared with a unit of a major bank such as Bangkok Bank, whose lending to SMEs alone is estimated at more than THB200 billion to THB400 billion, the THB50 billion size of Virtual Banks is very small.

“This should not be a cause for concern, because Virtual Banks will need considerable time to build a base, both in terms of attracting deposits and extending loans. Therefore, in the initial phase, they will not push household debt up too sharply,” Kobsak said.