Headquartered in Bangkok, Government Savings Bank (GSB) is a state-owned Thai bank established in 1913 by King Vajiravudh (King Rama VI) as the venue to safeguard his vast wealth. Initially called Savings Office, it was not until 1946 that King Bhumibol Adulyadej (King Rama IX) changed the name to Government Savings Bank, the name we know today. The bank’s status was also upgraded to being a government organisation, independently managed under the control of a board appointed by the Thai Ministry of Finance.
Today, GSB is committed to developing financial services that adequately serve the broad needs of the Thai people, who have opened 26 million accounts with the bank. It also classes itself as a “social bank”, with its mission to build a sustainable economy for Thailand by eliminating poverty and reducing inequality in Thailand, thus fulfilling two of the United Nations’ sustainable development goals.
To achieve these goals, GSB has recently undertaken a major digital transformation that strives to put several important banking solutions conveniently in the hands of Thai citizens and communities across the entire length and breadth of the country. Through the bank’s desire to pursue innovative offerings that simplify the process of obtaining financial services, many of the most financially vulnerable in Thai society—particularly in the advent of the COVID-19 pandemic—can receive the crucial financial support they need.
International Banker recently had the opportunity to interview two of GSB’s senior banking leaders—Mr. Vitai Ratanakorn, President and CEO, and Mr. Boonson Jenchaimahakoon, First Senior EVP in Information Technology—about how the bank continues to deliver cutting-edge digital-banking solutions to the Thai people, particularly those underbanked and lower-income communities throughout the country.
Gentlemen, thank you for your time today.
Mr. Jenchaimahakoon, I’d like to begin by asking you what role the coronavirus pandemic has played in expediting the bank’s innovation strategy with respect to digital lending.
Innovation comes from imagination and creativity, but it is inevitable that without identifying the right problem under the current circumstances, we are met with the compelling reason to innovate, forcing us to start investigating an alternative solution under the technology possibilities.
Our digital-lending offering was expedited by the COVID situation, where social distancing had to be in place for both our staff and our clients. In addition, the total volume of financially impacted customers is significant, and we have to support this overwhelming demand that cannot be handled by existing human resources. The situation forced both our clients and us to adopt the technology at an unimaginable speed.
Do you anticipate most of the bank’s progress in digital lending to remain in place once we move into the post-COVID era?
Post-COVID, we certainly believe that digital lending shall continue to be in place as this has already become a new de facto standard but unquestionably not with the comparable gigantic demand volume. We believe that human interaction is important in the service industry, and people want to be served by people. As for the customer relationship, which cannot be addressed digitally—even though we are in the process of making it digitally plausible, we shall take the time to understand our customers as human beings and serve their basic needs effectively.
Turning to you now, Mr. Ratanakorn, you have previously stated that one of GSB’s main goals is to become a “social bank”. In your view, what are some of the key features of a social bank, and how does such a bank differ from a traditional lender?
GSB’s key mission as a social bank is to build a sustainable economy for Thailand under two of UNICEF’s sustainable development goals, namely SD1: No poverty and SD10: Reduced inequalities.
In the financial world, most banks focus on shareholder value, which means profit, revenue and share price. By contrast, Government Savings Bank (GSB)—as our only shareholder is the Ministry of Finance of Thailand—is driving toward the wealth of Thai people under a sustainable economy. Our earnings and strong balance sheet and nationwide resources give us the ability to achieve our mission of being a social bank. We always tell our clients that they are not just customers to us, but they are the main contributors to achieving our mission as a social bank. Without them and their contributions to bringing us the business, it will be impossible for the bank to complete our dream of bringing equal opportunity to the majority.
Regarding those two sustainable development goals you just mentioned, you have previously highlighted the crucial role mobile-banking development plays in enabling GSB to operate as an effective social-banking provider. What are some key features of the bank’s mobile-banking offerings that you believe can help achieve its financial-inclusion ambitions?
Digital is the only means to eliminate time and distance; it is the only possible way to reach a large population with limited resources. Our findings show that customers in rural areas tend to adopt mobile banking more than in urban areas due to the costs to travel to the closest banking outlets.
The key success factor is that our MyMo mobile banking app must be extremely easy to use for our non-sophisticated group of customers. MyMo has evolved over time to add more functionalities, yet we must keep in mind that it must still be easy to use. The newly introduced digital lending and electronic debt restructuring are a few things we offer to help reach a large part of the population, together with simplifying the process to bring them into the digital era comfortably. The key is that you cannot succeed in utilizing digital if you merely copy the existing process onto digital.
It seems that MyMo is playing an especially pivotal role for GSB. For instance, you confirmed in March the launch of a low-interest loan that does not require collateral to support low-income earners and is only available through MyMo. How would you gauge the popularity of this loan to date?
We launched the first unsecured COVID-relief loans in November 2020 and another four subsequently for similar purposes but various customer segments throughout 2021. In total, the loans were given out to 1.72 million qualified customers out of 7.2 million unique applications via MyMo. The total loans dispensed are over 30 billion Baht (681 million GBP equivalent). There are almost 240,000 non-salaried customers who have never had any credit history and are unable to receive any unsecured loans traditionally, with the newly introduced ACS (Alternative Credit Scoring) to determine their creditability, which means their ability and willingness to pay.
Together with our technology partner and strong digital foundation, establishing this COVID-relief mechanism via digital meant it successfully launched within a month and hit the recorded number in no time.
Mr. Jenchaimahakoon, one particularly important way in which GSB has differentiated its digital-banking credentials recently has been its ability to shift the entire loan cycle (product creation, application, credit scoring, approval, repayment and debt restructuring) to digital self-service via mobile at scale, with capacity now for more than 400,000 loan applications to be processed in just a single day. Is the bank already realising the efficiency/productivity gains from this move? And is this translating into higher profitability for the bank?
Under the current situation, we did not evaluate from the view of efficiency or productivity gain but the value to help support an unbelievably substantial number of customers. As all the transactions are performed without commercial value from the beginning, our measurement is based solely on how many people we can assist in the shortest feasible time. We continue to monitor their passage from the loans we grant. Did we give the money to the right person? We define this from the point that their cash flow is better. We are learning how to give not too little, not too much and not too long.
But anyway, the foundation of this digital transformation is now established, so we can always offer similar digital services in parallel to any services (not just lending) for our clients. Thus, the benefits will unceasingly be realized in all future products and services, including the effective use of resources and productivity gains to provide the best customer services wherever possible. In addition, one of the most important things is that all the services are now not limited to only working hours but available 24 hours of the day.
That’s great news. I imagine the loan process is much simpler today. That said, banks continue to face the threat of rising nonperforming loans. Mr. Ratanakorn, are you satisfied with GSB’s current NPL ratio?
During the COVID pandemic, GSB’s NPL ratio has increased 54 basis points since 2020, but it is still under 3 percent. We have implemented extreme precautions for the impact of the COVID pandemic on our customers’ financial situations; 10 times more general provisions were put in place to support this securely. The low-income people are most impacted, and they are GSB customers, as none of the commercial banks ever pay attention to them; thus, we are highly impacted by the situation.
Our mobile banking has become the easiest means to support them to adjust their repayment schedules according to their financial capabilities. Our historical records confirmed our belief that these groups of people have the best discipline for repayment and willingness to repay. The compelling reason is that if they lost their creditability, they would have to return to the informal debt issuers, which offer a significantly higher interest rate together with tough terms and conditions.
Given this scenario, how important has debt restructuring been in supporting those customers who are struggling with their repayments?
The traditional debt restructuring at the branches is supported by the newly introduced offering to simply reschedule payments via MyMo anytime, 24 hours a day. This helps an additional 700,000 existing customers who have struggled economically during COVID to choose their repayment amount under the e-contract according to their capabilities to keep their creditability.
And if I’m not mistaken, the bank has opted to use AI (artificial intelligence) to provide an Alternative Credit Score for customers. Mr. Jenchaimahakoon, why have you decided to use this method? And what benefits does AI offer over more traditional credit-scoring methods?
AI and machine learning (ML) with the right questions can replace a few things people with traditional technology could not achieve in the past, especially in decision-making. We did see a few abuse cases of AI and machine learning, which has helped us not to repeat these simple errors.
The flexible repayment schedule adjustment during the COVID pandemic, the B-score and bureau score are totally ineffective. It is no longer able to evaluate the customers under this economic uncertainty. On the other hand, alternative credit scoring with mainly customers’ financial-interactions records can effectively predict future results.
Traditional credit scoring is solely based on statistical models that assume that many economic factors do not change over time. Together with AI and machine learning, continuous monitoring and model adjusting on an almost real-time basis to predict every single customer’s response to their financial situation are becoming possible. A totally new prediction model is achieved to determine the credit of each customer individually. We do observe people when they get better credit points over time and vice versa.
We will certainly need less staff in the future, but we should need those people who are more efficient than the machines and can help train the machines. Inevitably, machines and humans will complement each other and learn from each other at the best possible speed.
Would you say that GSB’s banking customers are now able to address all of their banking requirements digitally? Or do some matters still require visiting one of the bank’s branches?
Currently, not only GSB but all banks can achieve moving only 60 percent of their service catalogues onto digital services at most, even though these accommodate more than 98 percent of the customers’ interactions with their banks.
We have observed that not all customers can adopt digital banking in their lives, and not all interactions are effective on digital channels. We should not leave anyone behind, so there are two parallel tracks to rethink and redesign the services on the digital platform, with the bottom line to serve the customers’ needs—with the human-assisted service on SUMO (Sales and Services Unit on Mobile), our notable tools are offering similar services with almost identical flow but with human assistance, with the expectation that one day, clients can choose to do it on their own.
And finally, Mr. Jenchaimahakoon, what is the bank’s most significant goal concerning digital banking over the next 12 to 18 months?
The root causes of the economic situation during the COVID pandemic are due to low savings, which means less cushion for many people. The emergency fund, which should cover three to six months’ worth of household expenses, should be reserved. Banking products, especially in the investment area, are getting so complicated and are not accessible to a large group of people.
We learned that our few decades of effort to encourage financial literacy were totally meaningless. The goals to eliminate poverty will be reconsidered under the digital frontier; together with all our partners with a similar mission, we shall achieve our mission as a social bank and our original mission as a savings bank.
We wish you all the best in achieving such worthwhile objectives. Thank you both for your time today.