Thailand’s banking and financial services landscape has undergone a period of transformative change over the last few years, with more changes – many driven by the pandemic – in the last two years than in the previous ten.
Thai consumers have been very quick to adopt new banking technologies, with an enormous surge in digital payments and online transactions in recent years. In fact, digital payments in Thailand have quadrupled since before the pandemic, with the number of daily transactions made via the PromptPay platform now averaging 28 million, compared with 7 million per day in 2019, according to Assistant Governor Siritida Panomwon Na Ayudhya.
Thailand, with its high rates of financial inclusion, excellent digital infrastructure and digitally-savvy population, is well placed to become a serious contender in the digital banking race, both in the Asia Pacific region and globally.
“More than 80 per cent of Thai adults have a bank account, making it one of the best performing countries in terms of financial inclusion in the world,” said Mr Myles Bertrand, Managing Director APAC, at Mambu, the market leading SaaS cloud banking platform.
“Thailand’s advanced fintech ecosystem, high rates of mobile phone ownership and enviable internet penetration are also crucial factors in positioning Thailand as a potential frontrunner in the Asia Pacific digital banking space. At Mambu, we identified Thailand’s potential in this space some time ago, and subsequently appointed Mr Kiattipong Hanthaiphondee as General Manager Thailand earlier this year, to ensure we have executive knowledge and expertise on the ground,” he continued.
Mr Kiattipong Hanthaiphondee, General Manager Thailand at Mambu, said, “Thais have already embraced digital banking very warmly, with more than 75 million mobile bank accounts currently open in the country. Mobile payments, online transfers and managing financial services via smartphone apps is considered the norm these days, and consumers expect to be able to access their money when and where they want it.”
Research identifies APAC banks lagging behind on digital transformation
However, while digital banking is viewed very positively by Thai consumers, a recent report from FT Focus – the research arm of The Financial Times in London - that surveyed senior banking executives from around the world, found that three in five banks in the Asia Pacific region believe they will cease to exist within five to ten years unless they change their business models.
In the global study, Asia Pacific banks were identified as ‘lagging behind’ their counterparts in other regions, with less than one third describing their digital transformation strategies as advanced or mature.
On a more positive note, the report also highlighted that Asia Pacific banks are taking steps to ‘catch up’ to the rest of the world, with plans to increase technology investments, particularly in big data, machine learning and blockchain, at significantly higher rates than other regions.
Continued Mr Bertrand, “The strong commitment from Asia Pacific banks to increase their investment in new technologies is very positive, however banks in the region also need to change the way they approach innovation, and start proactively embracing new partnerships and collaborations. The ‘ecosystem’ approach has been incredibly successful in other regions, and with half of Asia Pacific banks concerned that they lack key internal workforce skills necessary to transform, it will prove very effective here too.”
Thailand’s financial services technology ecosystem is already in a very positive position, with the transformative changes brought about by new digital technologies readily accepted by Thai regulators, banks and consumers alike. Thailand’s digital infrastructure also puts the country at a significant advantage over other Asia Pacific nations, with extremely high smartphone ownership and internet usage. These factors are key indicators of Thailand’s maturity in the digital space, and point towards a bright future for the digital banking industry as a whole.
However, Thailand’s regulators are yet to announce a formal ‘road map’ for digital banking licences, resulting in organisations having to map out their own pathway towards a digital future.
Pathways to digitisation
While on the whole Thailand’s banking and financial services industry has embraced the digital banking concept, some more traditional banks remain reluctant to go ‘all in’ on their digital transformation strategies. So just what is holding these banks back from moving towards a digital approach?
For some, cost is clearly a factor, with the financial burden of many new technologies considerable. These banks may have also invested heavily in their legacy technology and feel they need to prolong its life for as long as possible, even though this technology may already be 20 or 30 years old.
However, for many of the more ‘digitally-averse’ banks, the reluctance to evolve can be the result of a culture of stagnation and fear – a sense of “we’ve always done it this way” - rather than concern about cost. The perceived risks of a digital transformation are just too high for some banks to seriously consider. But what these banks also need to consider is the risk of doing nothing, which could potentially be the biggest risk of all.
When assessing the risk of a digital transformation, it is important for banks to understand that a ‘rip and replace’ approach is not the only way, and in fact has been proven to be relatively slow, significantly more expensive and the greatest risk.
A more measured, lower risk approach to digital evolution, is to run a dual core, migrating to the new core over time. Another lower risk approach established banks may consider is launching a ‘digital speedboat’, setting up a greenfield tech stack under a new brand.
Whichever approach is selected, banks need to begin making progress on their digital transformation strategies sooner rather than later.
“It is vital that traditional banks have a clear digitisation strategy in place in order to maintain market share,” concluded Mr Kiattipong. “Without an effective strategy in place, legacy banks may be overtaken by new challenger banks and fintechs who are more open to embracing digital technologies. Mambu Thailand is here to help established banks to understand the benefits of digitisation and also bypass the pitfalls.”
Find out how Mambu Thailand can help your business join the digital banking revolution [download].