Virtual banks reshape Thailand’s lending landscape as debt risks draw attention

The launch of Thailand’s virtual banking services is expected to become a major turning point for the country’s financial system, bringing technology-driven lending services to more people who have previously struggled to access formal credit.

The new banking model aims to use digital technology to improve convenience and expand financial inclusion, particularly among groups that traditional banks may find difficult to assess, including online sellers, freelancers, self-employed workers and people with limited credit histories.

However, recent online discussions over digital loan approvals have also highlighted concerns about financial literacy and responsible borrowing.

The debate gained attention after some social media users shared screenshots showing successful digital loan applications from CLICX, a newly launched virtual bank, expressing relief at gaining access to credit.

At the same time, comments suggesting that borrowers could simply “borrow and refuse to repay” triggered concerns over the potential impact of irresponsible debt behaviour.

Credit access brings new opportunities

Virtual banks are designed to widen access to financial services by using alternative data and digital technology to assess borrowers who may not fit traditional banking criteria.

When used appropriately, loans can serve as a financial tool that helps people create opportunities — from managing cash flow and buying business supplies to expanding small businesses or covering temporary income disruptions.

The expansion of formal digital lending could also help reduce reliance on informal loans, which often carry higher costs and greater risks.

However, financial experts stress that easier access to credit does not mean borrowers are free from repayment obligations.

 

Regulators warn against “borrow and default” mindset

The controversy surrounding online lending has raised broader concerns about financial literacy among consumers.

Some borrowers may misunderstand that money received from a bank is a loan, not free cash.

A loan approval means the borrower has agreed to repay both principal and interest according to the agreed terms. Receiving money in an account marks the beginning of repayment responsibility, not the end of the process.

Failure to repay does not only affect financial institutions. It can damage a borrower’s credit record and reduce future access to formal financial services.

Persistent non-payment may lead to debt collection procedures, legal action and enforcement processes under relevant laws. In some cases, the consequences could affect a borrower’s financial situation and wider household stability.

BOT warns debt defaults could have long-term impact

Vitai Ratanakorn, Governor of the Bank of Thailand (BOT), said the online lending controversy and the possibility of deliberate debt defaults represented a significant risk, particularly for borrowers themselves.

He warned that people who intentionally fail to repay loans could lose access to the formal financial system for years.

“Borrowers may not be able to return to the financial system for many years. Even if the amount is only a few thousand baht or 20,000 baht, the damage could last much longer,” Vitai said.

Following the controversy, CLICX adjusted its lending approach by incorporating information from the National Credit Bureau alongside alternative data to improve risk assessment and reduce future lending risks.

 

Low-income borrowers face greater pressure

Kanchana Chokpaisansilp, executive of research at Kasikorn Research Centre, said Thai household debt repayment problems have become more visible, particularly among borrowers earning less than 30,000 baht per month in unsecured personal loans.

Personal loans without collateral remain one of the clearest indicators of household financial vulnerability.

Although non-performing loan (NPL) levels in this segment have remained relatively stable, this has partly been supported by government debt-relief measures and proactive debt management by financial institutions.

Banks have also managed problem loans through measures such as selling non-performing debt and writing off bad debt, helping prevent NPL figures from rising sharply.

However, closer analysis shows increasing concern among Stage 2 borrowers — customers showing early signs of repayment difficulties.

Within the personal-loan portfolio, borrowers earning below 30,000 baht per month accounted for around 15% of Stage 2 loans, up from 14.6% at the end of last year.

Although the increase is modest, it suggests that lower-income borrowers are becoming a larger share of customers facing early repayment challenges.

Credit can be a ladder or a trap

Thailand’s virtual banking expansion represents a major opportunity to improve financial inclusion and provide more people with access to formal financial services.

But experts emphasise that credit has two sides.

When used responsibly, loans can become a “ladder” that helps people build opportunities, manage businesses and improve financial stability.

Without financial knowledge, discipline and the ability to repay, however, credit can become a “trap” that pushes households further into financial difficulty.

Source: Krungthep Turakij, Thansettakij