KakaoBank is moving ahead with plans to establish a virtual bank in Thailand.

KakaoBank said on Jan. 22 it signed a joint venture investment agreement (JVA) with SCBX (SCB X Public Company Limited), a major Thai financial holding company, on Jan. 21 to set up a virtual bank.

At a signing ceremony held in Bangkok at 3 p.m. local time on Jan. 21, SCBX CEO Arthid Nanthawithaya and KakaoBank CEO Yun Ho-young (윤호영) attended and formally signed the agreement to establish a virtual bank in Thailand.

The virtual bank introduced by the Bank of Thailand (BOT) provides financial services only through a digital platform without offline branches. It is similar to South Korea’s internet-only banks.

Thailand’s smartphone penetration rate is above 90 percent, and PromptPay, a real-time payment system, is becoming widespread, pointing to rapid digital transformation. Still, tens of millions of people are classified as underbanked with low access to financial services. The virtual bank to be set up by KakaoBank and SCBX plans to provide innovative mobile financial services to them.

KakaoBank plans to acquire an initial 10 percent stake in the joint venture and later increase it step by step to 24.5 percent to solidify its position as the second-largest shareholder. Based on technology proven in South Korea, it will oversee overall front-end development, including UI and UX planning and building a mobile app. WeBank Technology Services, a subsidiary of China’s WeBank, will also join as a technology partner.

The Thailand expansion is significant in that it extends a successful business model achieved in Indonesia. Superbank, an Indonesian digital bank where KakaoBank made its first global investment, surpassed 5,000,000 customers in a short period and showed rapid growth, and recently succeeded in listing on the local stock market. KakaoBank plans to localise and apply this successful know-how to the Thai market.

The virtual bank plans to start official operations after system development and preparation, with the specific launch schedule expected to be finalised depending on approval from the Bank of Thailand. KakaoBank plans to use this as a chance to expand to regions beyond Southeast Asia, and to pursue a strategy of leading the building of mobile financial systems beyond simple equity investments and know-how transfers.

KakaoBank CEO Yun Ho-young said: "Entering Thailand is a symbolic achievement, marking the first time in 25 years since the Asian financial crisis that a South Korean bank has re-entered the Thai market." He added: "Based on the strengths of South Korea’s digital finance, we will build a successful virtual bank model and lay a foundation for opening up global markets."