Thailand's fintech comes of age
While the Covid-19 pandemic has adversely disrupted many industries globally, it has positively disrupted the finance sector -- especially in accelerating the evolution of FinTech solutions.
In Southeast Asia, Thailand is one of the region's biggest proponents of these trends due to the pandemic's disruptive effects creating a renaissance in FinTech payments in the nation. This, together with consumer behaviours which are evolving along digital lines and more societal sections looking for safer options, has positioned the country to lead the way in enhancing more digital facilities to promote greater financial inclusion in line with Thailand 4.0's financial inclusion ambitions.
Even before the pandemic, Thailand has been working strongly to encourage the use of digital payment methods between both consumers and businesses. Covid-19 further pushed the envelope; the ongoing shifts toward e-commerce, digital payments (including contactless), and instant payments have all been significantly boosted during the pandemic with real-time payments surging by 104%.
This push was not only facilitated by a greater societal propensity to limit using physical cash, but also by government initiatives such as the national PromptPay e-payment system, which has since been adopted by Thailand's leading private banks.
This move has also been extended to cross-border transactions via the industry-first collaboration between PromptPay and Singapore's PayNow, a partnership not only aimed at facilitating cross-border transactions with greater efficiency, but to also mark the first step in implementing the vision of a regional payment network.
Thailand's growing cashless ecosystem is showing strong promise, but more can be done to spur increased adoption nationwide. In doing so, the government is developing a robust national payment infrastructure that can shoulder more digital transactions in tandem with nationwide mass media campaigns encouraging their adoption. To go further, these efforts can be supplemented by the implementation of "carrot and stick" regulatory efforts -- with the government leading by example.
In terms of incentives (the "carrot"), initiatives such as discriminating GST/VAT tax rates between digital payments and other payment forms could be offered whereas deterrence (the "stick") could come in the form of fining retailers that do not possess digital acceptance options at checkout.
The government can exemplify both drives, which can include moves such as accepting only digital payments for government service fees; having the mandate to pay government officials' salaries digitally; offering income tax rebates to digital-payment only stores; issuing licenses related to digital banking and payment processing, and providing tax rebates in digital forms. Even more, the government may also consider removing large banknotes from circulation to underline its position.
Although Thailand's cashless drive is accelerating its FinTech ecosystem, several solutions remain nascent yet may be key to promoting financial inclusion as the nation heads towards Thailand 4.0. For instance, for Buy-Now-Pay-Later (BNPL) options, there have already been movements in the form of foreign players such as Singapore's Atome, Hoolah and Indonesia's Traveloka extending their services to Thailand.
To note, BNPL options also represent a form of instalment purchase plan, specifically presented as an alternative credit facility for consumers who may not traditionally qualify for credit even if they do not necessarily have bad credit scores. For Thailand's greater society, their digital-first nature via smartphones provides mass appeal and provides wider accessibility.
Another area primed for growth is the use of biometrics in digital transactions and digital customer on-boarding (i.e., eKYC). Thai consumers are already warming up to these solutions, as highlighted in a Visa survey, given the increase in tech-savviness and heightened adoption of digital behaviour in daily lives. Thailand's central bank has already approved the use of biometrics for authentication and aims to have the technology proliferated in both the private and public sectors.
There is also an effort to grow the nascent Open Banking sector. Currently, there are no extensive regulations as Thailand does not have the necessary infrastructure to facilitate this (although a framework may be introduced following the release of the Personal Data Protection Act in 2020).
The transformative nature of Open Banking is its potential in facilitating better financial inclusion as it offers consumers the choice of selecting from multiple service providers, whilst emboldening them to take better control of their finances and make informed decisions.
Thailand's strong cashless adoption -- especially during disruptive periods like the pandemic -- is showing that people in the country are looking forward to a thriving FinTech future and are open to new payment possibilities. This trend has coincided with more holistic industry efforts designed to promote greater inclusivity within the financial ecosystem, such as BNPL, biometrics/eKYC verification and Open Banking.
The government is helping to set the right direction for most of these initiatives, chiefly via the Central Bank Digital Currency (CBDC) which is designed to set the standard for future digital currency adoption, which has already undergone a litmus test with corporates and is likely to be extended to the more mainstream retail sector.
Still, while national drives are strengthening the financial ecosystem, they need to be boosted by more concerted efforts by other ecosystem stakeholders for mass adoption. FinTech innovation and industrial support is one aspect, but -- to promote the unfettered use of these solutions and initiatives which really largely began gaining traction due to the pandemic -- these stakeholders are poised to do more to contribute to the landscape's future growth.
For enterprises, trade associations and even consumers, the gauntlet has been thrown down to raise their involvement in nurturing a more encompassing FinTech future through greater financial inclusion, leading towards a brighter future envisioned via the Thailand 4.0 roadmap.
Piyachart Ratanaprasartporn is CEO of 2C2P Thailand.
- Digital Finance