After months of speculation, the Bank of Thailand (BOT) has published its official Ministerial Notification on Guidance, Procedures, and Conditions for applying for a Licence for Virtual Bank (Virtual Bank Notification) on 4 March 2024. The Virtual Bank Notification sets out provisions regarding terms, conditions and material requirements necessary to obtain a licence to operate a virtual bank business in Thailand.

Key Overview

The concept of “virtual bank business” in Thailand is rooted in the BOT’s objective to address the needs of underserved or unserved sections of the population who have limited access to traditional financial services. These include low-income individuals and small to medium-sized business operators in Thailand, who often experience restricted financial flexibility and stability. Additionally, the BOT aims to strengthen the competitiveness of Thailand’s financial sector by issuing virtual bank business licenses to new operators in the Thai market.

Key Considerations and Qualifications

A business operator wishing to apply for a virtual bank business licence from the BOT may submit an application from 20 March 2024 to 19 September 2024 (Application Period).

With respect to the qualifications, an applicant (which must be in a form of a consortium) must have the following qualifications:

  1. experience and resources necessary to support virtual bank operations in line with its business model;
  2. expertise and experience in conducting business that utilises technology and provides services through digital channels; and
  3. experience demonstrating the ability to acquire, access, manage and utilise data effectively. This includes the development of systems or data connections to facilitate user activities, enabling them to conduct transactions with other providers.

In addition, any person who will directly or indirectly hold more than 10 per cent. of the total issued shares in the virtual bank (Significant Shareholder) must possess certain qualifications, including (but not limited to):

  1. a good corporate governance framework and reputation;
  2. good operational performance and a stable financial status;
  3. no history of being accused, charged, or subject to lawsuits related to fraud or corruption by any authority such as the BOT, the Securities and Exchange Commission, Office of Insurance Commission, or any other domestic or international authorities on similar grounds; and
  4. no current or past actions that could provide justifiable grounds for suspicion regarding any preferential treatment, personal gain or involvement in decisions leading to conflicts of interest. Additionally, there should be no indications of behavior suggesting dishonest intentions.

Further, the applicant must also submit information in relation to any shareholder(s) who will significantly influence the virtual bank’s operation (regardless of its shareholding in the virtual bank), such as those who will:

  1. play a substantial role in providing financial support to the virtual bank business;
  2. be capable of operating a technology-driven business and delivering services through digital channels; or
  3. possess the ability to manage risks associated with financial operations and fostering a strong risk culture.

Pursuant to the Virtual Bank Notification, the BOT places an emphasis on the financial stability and capability of the virtual bank business. The BOT therefore requires any shareholder who will directly hold 20 per cent. or more of the total issued shares of the virtual bank to provide a written undertaking that it will provide financial support for the virtual bank’s operation (including financial support during its exit plan). 

Approval Process and What’s Next?

Within nine months from the end of the Application Period (or up to one year if extended by the Minister of Finance (Minister)), the BOT will propose a list of qualified applicants for the Minister’s approval.

If a qualified applicant is approved by the Minister, the approved applicant must establish a public limited company headquartered in Thailand which shall:

  1. request the issuance of the virtual bank business licence by the BOT; and
  2. begin its operations within one year (subject to an extension granted by the BOT for a further period of no more than one year).

In order to submit an application for a virtual bank business licence, the public limited company (set up by the qualified applicant) must have a paid-up registered share capital of THB 5 billion, with plans to increase it to at least THB 10 billion after the initial business period and demonstrate the readiness of various operational systems required by the BOT.

It is also worth noting that foreign entities can hold a maximum of 25 per cent. of shares in the virtual bank. However, the BOT can lift this restriction on a case-by-case basis. Nevertheless, it is crucial to note that without an explicit approval from the Minister, foreign entities are not permitted to hold shares in a virtual bank in excess of 49 per cent.