Thailand looks set to be one of Southeast Asia’s next Fintech Hubs as digital convergence continues to spread. The emergence of a new generation of fintech startups has spurred development of a “complete payments” ecosystem.
In Southeast Asia, technological innovation is rapidly changing the financial services industry. Enabling factors such as steady economic growth, a large population and youthful demographics, a rapidly expanding internet and smartphone penetration, and the proactive stance of a number of national regulators have led investors to direct approximately US$1 billion into the financial technology (FinTech) sector since 2013.
Thailand in particular is well-positioned to capitalize on the new developments in FinTech. The country has seen rapid growth in mobile and internet penetration, with internet access increasing from 67 percent of the population in 2017 to 84 percent a year later.
Thailand also has one of the strongest regional track records in improving access to finance, with 97 percent of the population either banked or with access to formal financial services offered by other providers. More fundamentally, perhaps, Thailand has the largest number of software and app developers among the Association of Southeast Asian Nations (ASEAN).
Recognizing the promise of FinTech innovations for access to capital and financial inclusion more broadly, the Bank of Thailand (BOT) has taken a leading role in creating an enabling environment for FinTech expansion in Thailand. This work has included organizing the 2018 Bangkok FinTech Fair, advancing a National e-Payments Master Plan, and establishing a FinTech regulatory sandbox.
Given that social commerce has been booming in Thailand at the moment, Fintech companies are coming up with even more innovative technology that not only benefits the financial sector but also the social commerce sector.
As Thai consumer’s behaviour enters the digital savvy era, FinTech start-ups are able to innovate and come up with new financial services that will better serve consumers or even solve existing problems. For instance, nowadays most online vendors do not own an official payment system for their customers. Most of the time, online purchases in Thailand are completed via contacting merchants via instant messaging applications such as Facebook Messenger and LINE.
Afterward, consumers would have to leave the chat application to transfer money then return to the application to send the proof of payment. As a result, the process still requires several procedures and consumes time. This is a gap for FinTech to innovate or offer new services as a solution to enhance the payment services or best seek the system that will best fit consumers’ way of life.
Blockchain is a type of technology that has a heavy influence over the FinTech industry. A blockchain is a digitized, decentralized, public ledger of all cryptocurrency transactions. Constantly growing as ‘completed’ blocks (the most recent transactions) are recorded and added to it in chronological order, it allows market participants to keep track of digital currency transactions without central recordkeeping, thus making communication easier. The prospects of Blockchain does not stop at FinTech, but also extends to other businesses such as the tourism industry, organizations, or social commerce which is the use of social media for increasing efficient trade. Thailand has begun to adopt Blockchain in different industries such as finance, energy, retail, and the government.
The Governor of the Bank of Thailand, Dr. Veerathai Santiprabhob, announced that Thailand plans to use blockchain technology to improve existing banking applications. The technology is gaining momentum in Asia. Santiprabhob made the plan public at the Nomura Investment Forum in Singapore.
A new approach to interbank settlements is also being developed by the Bank of Thailand (BoT). BoT is toying with an idea to utilize commercial Central bank digital currency (CBDC) to explore applications and implications for operation. The aim is to develop a faster and cost-efficient transfer and validation system by removing third parties that exist in such operations today.
The easy acceptance of blockchain technology by Thailand does not mean that they are changing their stance on cryptocurrencies. All businesses dealing with cryptocurrencies should register with Thailand’s Security Exchange Commission within 90 days.
Thailand remains optimistic about the potential growth of their Fintech industry as it is in line with the Thai Government’s Smart Nation objectives.