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Thailand's oldest bank hits back at Grab entering food delivery

Siam Commercial flips the script on ride-hailers with no-fee app

Siam Commercial Bank aims to bring 50,000 restaurants on board to its app by the end of the year. (Photo courtesy of Siam Commercial Bank)

BANGKOK -- Thailand's Siam Commercial Bank will challenge food-delivery heavyweights Grab and Gojek by launching its own service this month, hoping the quickest way to new financial customers is through their stomachs.

The move is also an attempt to flip the script on the two Southeast Asian ride-hailing companies, which have made inroads into financial services, like e-payments. Now, the country's oldest bank and  fourth-largest lender by assets is entering one of their core business areas instead, which it hopes to leverage into new opportunities for lending. 

Because banks are restricted from entering into new business areas, Siam Commercial Bank will set up a new food delivery company through its venture capital arm. The new company aims to bring 50,000 restaurants to its Robinhood app by the end of the year, largely out of existing clients.

"We will create a sustainable ecosystem for food delivery," said the bank's CEO Arthid Nanthawithaya.

Demand for food delivery by Grab and Gojek, which were founded exclusively as ride-hailing platforms, has surged in Thailand amid the coronavirus. While delivery platforms helped restaurants continue to operate through a nationwide ban on dine-in service, there is growing pushback against the 20% to 40% fee they charge for each order.

In contrast, Siam Commercial Bank will waive commission fees. Restaurants will also receive the proceeds an hour after delivery using the bank's digital banking service, compared with a roughly monthlong wait through Grab.

The new service is designed to help restaurants that have taken a hit from the coronavirus, according to Srihanath Lamsam, who heads the new unit. But the bank's greater interest lies with lending opportunities the new app could uncover.

Thailand's policy rate is now at a record low of 0.5% due to the coronavirus-induced economic slump, which in turn has squeezed bank earnings. Thailand's nine publicly traded banks are expected to log a 36% drop in net profit in 2020, according to KGI Securities (Thailand).

Siam Commercial Bank is targeting restaurants, many of which are smaller businesses and subject to higher borrowing rates, to boost income. Although restaurants tend to have a relatively high default rate, the bank believes it can minimize risks by feeding order histories and other data from the app to its existing artificial intelligence-powered screening system.

The bank aims to double digital lending to 40 billion baht ($1.26 billion) in 2020, and believes food delivery is crucial to achieving this goal.

The bank is also launching a counterattack on Grab and Gojek, which has been making inroads into the financial sector, by taking the fight to their home turf.

Grab partnered with Bank of Ayudhya, a subsidiary of Japan's Mitsubishi UFJ Financial Group, to start lending to restaurants in May. Grab and Gojek have also entered into e-payments and insurance. These platforms possess a trove of customer data, and could eventually rival banks in mainstream financial services as well. So far, most financial institutions have been on the defensive against these newcomers.

Siam Commercial Bank had been preparing to branch out into new fields for some time, with a particular focus on digital services. It was among the first to waive fees for remittances via digital banking in 2018, and increased its digital banking base four times in four years to about 10 million as of March. Last year, it sold its life insurance business to a Hong Kong company for 92.7 billion baht, and will invest 20 billion baht into digital services over three years.

"Many people have started to use digital services because of the coronavirus," Srihanath said. The bank is crossing traditional industry lines in hopes of cultivating a new customer base.

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